What’s your ‘interest only’ strategy? Are you losing business?

A great opportunity and reason to make contact with an existing client is prior to the expiry of their interest only (IO) term. The bank will typically send the borrower a letter 6 weeks prior to the IO expiry telling them the repayments will revert to P&I. But brokers need to communicate with clients before the banks do.

The best case is to send a letter to the client 12 months prior to the interest rate expiry letting them know that it’s coming up. Warn them that rolling over the IO term may require a credit approval (depends on the lender of course) so if they are considering changing jobs or doing anything that may compromise the approval, then ask them to speak with you first. Then, I would suggest sending another communication no less than 8 weeks prior to the expiry suggesting that you need to complete a review and follow up with a phone call. That should leave enough time to arrange a refinance if that’s what you decide is in the clients best interest.

If you don’t take the above approach you risk the bank re-writing the loan (so you stop getting trail commission) or worse still, another broker looking after “your” client.

Here’s a goal for you this week: ensure you have a system for automatically generating letters to clients to warn them about IO expiry before the bank does. Put it in your diary now.

Do you have some tips or ideas? Leave a comment below.