in your best interests
Here are a few tips and secrets that you should bear in mind when considering your new loan.
1. Save big time with a shorter term. The most common mortgages have fixed rates and a 20- or 30-year term. A 30 year loan of $300,000 at 6.5% will cost you a total of $382,633 in interest over the lifetime of the loan. If you were to reduce this term down to 20 years you would save yourself in the region of $145,000 in interest. Sure, your repayments will be higher each month - but if you can afford to pay an extra $340 per month (in this case) you can see it is definitely worth it long term!
2. Increase Your Repayment Frequency. Making fortnightly payments as an alternative to monthly payments, results in you paying half of the monthly amount 26 times per year - the equivalent of one extra full month per year. This will help shorten your loan term, and could save you tens of thousands of dollars over the lifetime of the loan.
3.. Points Make a Difference. You may not think that shaving an extra 0.1% off your mortgage would make a helluvalot of difference, but let's take a quick look at some numbers to see. Assuming we still have our $300,000 loan over 30 years (as above) and an interest rate of 6.5% you would pay a total of $682,633.47 to clear the loan over this term. Now, if your super helpful Wellington mortgage broker (yes, me!) managed to negotiate only a measly 0.1% discount you would still save over $7000 over the lifetime of the loan. And that's with only a 0.1% discount. That's $7,000 in your pocket and not theirs! Having a skilful negotiator on your side makes all the difference as you can see.
4. Having a Middleman on Your Side. As you know mortgage brokers are financial services firms that will help you arrange a mortgage. As we have good relationships with several lenders in the Wellington area (covering Kapiti, Upper Hutt, Lower Hutt, Porirua and Wellington city) we know from day to day what the rates are for each of the many types of loans that are available. We also know what each lender’s rules are for prospective borrowers. There are always nuances, so it pays to employ the services of an expert to assist.
We can help you understand the requirements and also help you fill out the forms, put together the necessary paperwork and submit it to the lenders. We get paid by the institution you place your business with, as we are bringing business to them (rather than them having to do this themselves). We essentially do the legwork for them!
Conditions will vary from client to client, of course, but using a mortgage broker should be a low- or no-cost option for you,
In Summary. Buying a house and establishing a mortgage are likely to be the biggest financial transactions most of us will ever make, so it makes sense to use as many 'tricks' as you can to ensure make it as pain-free as possible. The process can be daunting to even the most experienced, but if you do your due diligence/homework (and don’t go buying more house than you actually need) you can definitely prosper.
To discuss any of the points above, or to just touch base with Brian please click on our 'Live Chat' tab (bottom right) or use our Contact form here.
Brian MacLean looks into tips, ideas and strategies you can use to get ahead financially..