Why getting the right mortgage structure is key

Tue Sept. 21st 2021

We are starting to see rates increase on a weekly basis, so now really is the time to be reviewing your mortgage - it's not all about getting the lowest rate possible, but the more they continue to go up, the harder it is going to be to pay that loan down!

Over the last few weeks we have seen regular rate rises from all lenders, so could this be the beginning of the end for record lows?

With the OCR rate changes currently feeling like an ever-moving target, it can seem impossible to try and 'guess' what to do when refixing. Remember, most of us will have a mortgage for 20+ years - it's inevitable rates will rise and fall in that time. Instead, consider these 3 things:

1. How much can you commit to paying?

2. What is changing for you in the near future?

3. What is your strategy for paying off debt faster?

Video credit: Tony Hailwood: Money Trainer

Here's the action we think you should be taking...

REFIX:  When taking advantage of fixed term rates, making sure the loan terms and rates meet your goals will save you potentially thousands in interest costs, as well as lower your risk, which helps you get to those goals faster. Splitting your loans across various fixed terms and aligning these with your goals will also help you hedge your risk (meaning it will reduce the risk of rising interest rates). Rates are always on the move, so if you are considering breaking a loan, we can work out what the cost of this will be, if any, and what the savings or benefits might be when compared to your new rates and structure. If we think it is best to leave your rates as they are, we will tell you.

RESTRUCTURE: Arguably the most important component of your loan is the structure. Are you on Interest Only but actually have the ability to be paying down the loan? Is your whole balance fixed in, restricting your ability to make overpayments? Would having access to an overdraft type facility allow you more freedom and flexibility? Changing the term of your mortgage could help you free up some cash in the short-term, or speed up the process of paying the loan off faster. 

REFINANCE: Ever noticed how the discounts and free trials are only offered to new customers? Well, it's like that at the banks too! You might think you're getting a good deal with your current lender, but we know that you could benefit from cashbacks and potentially even lower rates if you move to a new provider. We can help make the process easy, and you could earn money for nothing!

RESEARCH: Changes have and will continue to happen in this market, but remember not all of them affect you. We work closely with lenders to have a thorough understanding of their requirements - what will get your mortgage over the line and what won't. Whether you're taking your first step on to the property ladder, or looking to expand your property portfolio, we can help you get that all important approval.

These changes are not just affecting existing borrowers. If you are looking to buy your first home, expand your property portfolio, or upgrade your current home, now is the time to act!

It is not currently clear what further restrictions might be imposed by the government or the banks, but these could significantly limit your ability to make changes to your mortgage in the future. Some banks have already tightened their rules, so if you have property plans, my advice to you would be to not wait around to find out what else is going to change!

If you don't have the answers, or want to unpack this further, we can help you structure your mortgage based on what's right for YOU.

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