Your mortgage is usually the biggest debt you’ll ever have – but it doesn’t have to be quite as big as some of the banks would have you believe! Our refinancing and restructuring expert, Lisa Barton, takes a look at some easy ways you can save serious money on your mortgage.
People are creatures of habit – even if they’re struggling with mortgage payments or are looking to grow their property empire, they might not be proactively looking for a better deal or better structure. Yet I firmly believe that if everyone knew the benefits of getting proper advice around how to make your mortgage work for you, they’d all be running out the door to restructure!
So many people don’t actually know what they’re missing out on – but we don’t want you to be one of them. So here are Money Empire’s top tips for saving money on your mortgage:
Just because one lender offered the best deal on your mortgage when you set it up, doesn’t mean it’s still the best deal years down the track. So many people get put off refinancing because of break fees, but if you’re able to refinance cleverly and make bigger gains than what the fees would be, then of course it’s worth it.
That’s when talking to a financial adviser comes in handy – we’ll help you determine if that’s the right route to go down, and then make sure you’ve got exactly the right structure. Which brings us to…
Restructuring your mortgage is one of the most powerful things you can do – it will ensure that your mortgage has the right structure for your financial level and financial goals. Whether you stay with the same bank or change, it’s about matching different product types (fixed, floating, revolving credit) and terms (1 year, 3 years, 6 years etc.) with your current financial situation.
By portioning out your mortgage into different structures, it enables you to best take advantage of good deals while still giving you the flexibility or stability that you may need depending on your situation. A financial adviser can help make sure your structure is right for you.
If you’re lucky enough to have multiple properties, there’s nothing worse than having mortgages for all your properties with just the one bank. If you do that, then it’s basically like the bank controls your property portfolio – not you! With total control over all your mortgages, they can demand that you pay more than you think you should come sale-time or make it tricky for you to move money around.
That’s why we suggest spreading that mortgage love – have each of your mortgages with a different bank to not only keep the control in your hands, but also make sure you’re best able to take advantage of banks’ different benefits.
If you end up with personal debt, whether a car loan or debt for something else, you could end up paying anywhere from 10 to 22% in interest. By bundling that under your mortgage, you’ll end up paying 4.5 or 5%, and end up being able to kill that debt faster and go back to paying more off your mortgage. What’s not to like?
Do you have cash savings that you’re building up, perhaps to buy another property or head off on an overseas trip? We recommend putting it against your mortgage (usually in a revolving credit account) to offset interest – it’ll help cut down on the amount of interest you need to pay, but you’ll still be able to pull it out when you need it.
If a client’s goal is to stay in their own home and pay down their mortgage as quickly as possible so they’re free to go on holidays and invest in other things, then we’ll make sure that their mortgage is structured to suit that goal. That’ll enable them to pay as little interest as possible and pay off the mortgage quicker (we’ve had heaps of clients who end up with a 15 year mortgage instead of a 30 year one).
If, on the other hand, a client’s dream is to build a property portfolio, then the refinancing/restructuring process can help them put together a deposit for their next property. We’ll help them get equity out of their existing house, then use that equity to purchase another property, with mortgages in separate banks and structured correctly to help them keep building their empire.
What it comes down to is that there’s no one way to structure a mortgage. Your mortgage should be financed and structured in a way that works for you. A good financial adviser will help you figure out exactly what you want to achieve and how to get there – saving heaps of money on your mortgage in the meantime!
Keen to save money on your mortgage (or get it set up right from the start)? Just drop us a line to get started.