When potential buyers find a property they want to purchase, they focus on securing a loan with a mortgage lender who offers the lowest interest rate. This is good practice, but people always forget to think about another very important thing:
Yes, you heard me right. Your experience as a customer is just as important as your interest rate. Let me explain why.
Expect the best customer service from your mortgage lender
Many people assume that financial institutions offer average or below average customer service. And so, they do not challenge this perception, or they expect less.
Remember, your mortgage will probably be the largest debt in your life.
Whilst your lender is making a huge profit from your debt, it could take you more than a quarter of a century to pay it off. As such, you need to expect nothing less than excellent customer service especially if you want to become a property investor.
As a property investor, your aim should be to grow your property investment portfolio. To do this, you need cash in the bank to buy new properties.
If you don’t have cash in the bank, like most people, you’ll need to release equity from one of your existing properties to make a new purchase.
Furthermore, property markets are competitive. When your offer on a property is accepted, your mortgage lender needs to release the fund quickly so you don’t lose the property to other buyers.
A lender with good customer service will act quickly and efficiently. A mortgage lender with slow or bad customer service may jeopardise your chances of securing a property.
How to tell if a mortgage lender offers good customer service
The best way to get insights on a lender’s level of service is to speak with existing customers.
If you do not know an existing customer, then refer to comparison websites and online customer reviews, or post an open question on an online discussion forum.
Don’t confuse good customer service with low-interest rates
Building societies and credit unions market themselves as more community focused. Generally, they offer lower interest rates than high street banks because their organisations are owned by their members. Hence, dividends are not paid to shareholders.
Lower interest rates mean lower mortgage repayments. But just because you receive a lower rate doesn’t mean that the customer service will be better. You have to decide which is more important to you.
I’ve had mortgages with high street banks and building societies. Though my interest rate is lower with a building society, the service is poorer.
That’s because smaller lenders may outsource specific functions, such as conveyancing, to external companies. This means you’ll receive more paperwork from different companies to fill in; thus, delaying the buying process.
Smaller lenders also have less branches than high street banks. So if you prefer face-to-face communication, you might have to travel further distances to reach a branch.
As I plan on purchasing more investment properties, I will switch my mortgage from my building society to a high street bank once the fixed term ends because, to me, customer service is slightly more important than low-interest rates.
As a property investor, you need to manage your team. Your mortgage lender is part of your investment team because they decide whether or not to give you cash.
If you decide tomorrow that you are no longer happy with your lender, you can’t switch banks without paying a penalty unless your fixed term has ended. This is why customer service needs to be prioritised like interest rates when you select a mortgage lender.
So, do you agree that high street banks are better mortgage lenders?
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