Don’t Be a Mortgage Ostrich!
Mortgage payments – they’re always there in the back of your mind. You think about it before buying a new car, getting a gift for your spouse or taking the family on a vacation. These days you’re likely to be thinking about it before you put petrol in the car or push the shopping trolley around the supermarket. In the current rising interest rate environment and with inflation boosting the cost of living, the concern around mortgage affordability will no doubt increase over the next few years.
The worst thing you can do is put your head in the sand.
Mortgages are more flexible than many borrowers think and there are always options to consider to try and improve your situation. No one who takes on a 30 year mortgage will have the same circumstances over that time and your mortgage should change and adapt to those circumstances.
Remember the four R’s – Review, refix, restructure or refinance
Review
Review your mortgage regularly and see if you can get a better deal with your own lender or with another lender. This is where we can help you – we’ve got the experience in talking with lenders to get you a better deal. Better isnt always about rate either. The major influence on loan repayments is not rate, but term (how long the mortgage is for). Take the opportunity to get some advice and take stock of your current set up and compare with other available options.
Refix
Refix tends to be the most common form of loan maintenance for borrowers. These days many banks give you the option to refix online, a couple of clicks and its all done. The process is so quick that I wonder sometimes how many actually stop to think, “is there a better option?”. At The Mortgage Supply Co we are always available to help our clients with that decision and make sure the rate is competitive. With rates rising, some of our clients are talking to us about breaking their fixed term rates early and re-fixing for longer than the usual two years in the belief that rates will continue to hike.
Re-structure
Re-structure your lending is a lesser used option but one I feel will become more commonplace. Extending a loan term back out will lessen repayments more so than any reduction in rate but always needs to be done with caution. Taking a loan that has say 23 years left on it, back out to 30 years will increase the life of the loan and increase the cost of interest over time but it will decrease repayments in times of financial stress.
Some borrowers will want to shorten their term. This will increase payments but save many thousands of dollars in interest. Banks these days tend to want an application to either decrease or increase loan terms, treating it as a credit event and wanting to ensure borrower affordability.
Re-finance
Re-finance is what we do when options are explored with the existing provider and they just won’t play ball. Sometimes the best option just sits elsewhere. There’s nothing more frustrating than your bank not wanting to support what you want to do or just simply they are not market competitive at the time you want to re-fix.
Many of our clients come to us having tried their bank first. They expect that the many years of business they have had with that bank counts for something, but to be frank, it doesn’t. Quite simply if your numbers don’t work, they don’t work and your years of being a customer won’t count for much.
The good news is that all banks are slightly different and there is a wide range of quality options in the non-bank sector. You just need to find the right mortgage adviser and make use of their expertise to sort things out for you.
Refinancing might be right for you if:
- Your current provider won’t give you the increased lending you want, whether it’s for a new home, an investment, renovations, or debt consolidation.
- You want to re-structure the lending you have but your bank won’t help
- There are better rates elsewhere
- You’re simply just not getting the service you need and its time to change
The first step is to take some action and review! Don’t be a mortgage ostrich!
David Windler
Financial Adviser and Mortgage Broker
The Mortgage Supply Company