How your mortgage structure can either cost you or save you $$$
Awesome, you’ve been approved for a loan and found a home you love, and now it’s time for all of the paperwork. While it can be easy to skip through this bit, it’s actually the part where you need to ensure that your loan is structured in a way that will work for you, not cost you.
There are many home loan structures and interest rates available to borrowers and each product has its own pros and cons. It’s important to choose the one that’s right for you, and yes this can take some time (it’s also why we recommend getting in touch with us, as we look through all the different options for you and just present you with the best ones!). This process isn’t to be rushed as it’s literally what can end up costing you money in the long run!
For a start, we take a look at your current situation and also your future goals. Maybe right now you are a couple with dual incomes, but you are planning on starting a family in the future and funds could get tighter. Or maybe you are wanting to pay off this property as soon as possible so you can begin to use your home's equity to buy an investment property in the next few years.
We also look at things like your future plans for the property and your repayments. Is this home your first home that you plan to upgrade in a few years? Do you want to be making extra repayments now so you can shorten the life of your loan? Are you nearing retirement, so need to pay the loan off quicker than normal? No matter your individual situation, ensuring you have the right loan structure in place is crucial in order to keep your interest repayments to a minimum and ensure you are repaying the loan in the timeframe that you desire.
While your situation and goals all play a part in determining the best structure for your home loan, so does your preference around interest rates. You may like to know exactly how much your interest will be and ensure that your repayments are the same amount each month - if that’s the case, then a fixed interest rate will provide you with that stability. If the amount changing each month doesn’t phase you, and you are prepared for the rate to go up or down, then a variable rate might suit you better.
The other option is to split your loan across both a fixed and flexible rate on different terms. This way you can benefit from having flexibility in case rates increase or decrease. It also allows you to pay down chunks of your mortgage without getting hit with early repayment fees. It’s a good idea to talk to your mortgage advisor about the best way to split up your loan to ensure that the repayment terms are best suited to you and the amount you are spending on interest is as minimal as possible.
While all of this can sound a bit mind boggling, it’s really important to get right as ending up with the wrong loan structure or term could end up costing you thousands in extra payments or through bank charges such as break fees.
No matter where you are at in your home buying journey we are here to help. If you are getting ready to buy a home and take out a loan, we can step you through the process and ensure it’s all set up correctly. If you already have a loan but are unsure if it’s set up as efficiently as It could be, then we can assess it and help you make any changes as needed.
Get in touch with us today for an obligation free chat! It’s simple, either call us on 03 441 1307, or register your interest online and we will be in touch.