With the bulk of the holiday season over, could 2011 be the year for a new or improved mortgage?
If your current mortgage no longer fits with your goals, you could benefit from refinancing or approaching your lender for a better deal.
Start with the rates you’re paying. This isn’t the only thing to look for in a good home loan, but it’s a good start since small differences in interest rates can equate to hundreds or thousands of dollars a year.
The lenders and comparison sites have loan calculators and you should spend some times on them, become an expert on what you can save.
Use the comparison sites to get a 12-month picture of where interest rates have been with this lender. If another lender has a much cheaper product, is it a honeymoon rate or is it part of long-standing policy?
Rates alone won’t decide the quality of a loan. So start by making a list of your goals – this clarifies what you’re looking for and brings the mortgage’s features into more practical focus.
What about payment periods? Weekly or fortnightly payments allow you to pay off of a mortgage faster than the standard monthly repayment.
Does your current lender doesn’t offer this?
Also, do they allow you to repay more each fortnight than the agreed schedule? This can speed the payment of the loan and is important to many people.
Lump sum repayments are important for business owners, so you can put unscheduled sums into the mortgage, bringing down your loan balance and saving you money.
Yet your current lender may discourage it; your current lender may also use penalties and fees to discourage you from early repayment.
If your goals include retiring debt quickly, then a mortgage with no early repayment penalties should be high on your check list.
Another issue is the ease with which you can draw-down equity from your current loan. If you use your mortgage as a ‘bank’ – for holidays, renovations etc. – then you need a lender who makes this simple.
Do you want a redraw mortgage, where all your income goes into the mortgage account? Or do you need to be able to switch between fixed and variable-rate mortgage or the flexibility to split the loans as a mix of both?
If this is important, add it to the health check list.
In short, once you have a goal, you must find the mortgage product that supports your goals.
Define your goals, do your research, and as always – be prepared to act when you find what suits you.
Make 2011 the year when you take back ownership of your goals.
Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark on mark.neos@ybr.com.au with any queries you may have or check www.ybr.com.au for your nearest branch.