As the new financial year is now in full swing, it is a great time to review your mortgage/debts and ensure you are on the right track. Navwealth’s Lending Specialist, Shane Price gives his top mortgage tips below…
- Saving Interest
- Thinking ahead
- Choosing carefully
- Getting the right advice
- Reducing Risk
With the beginning of a new financial year it is important to remember to continue to make sure any additional cash available is working to save you interest off your loan and therefore helping you to pay your loan off sooner. Just an additional $200 per month can save 5 years off your mortgage. Lenders calculate interest daily and charge this to your loan monthly so the sooner you make the repayments the lower the interest on your loan. By paying this repayment on a weekly basis you could save almost 8 years off your mortgage.
- Always make sure your variable rate loan has a fully transactional offset account attached. This way any additional savings you have will save you interest daily while you are not using it.
- Pay your loan weekly or fortnightly instead of monthly as interest is calculated daily so the sooner you make a payment the lower the interest is for that month and beyond.
It is important to get the structure of your loan right from the beginning to ensure that it suits your current financial position, however it is equally important to think ahead to make sure it will also suit your future needs and financial position.
- The home you buy today may not be the home you are in tomorrow so don’t sacrifice future tax benefits by not thinking ahead and making sure your loan today is set correctly for the future. By using an offset account instead of a redraw facility to help pay your loan off sooner you can still have the maximum potential loan available as an investment loan later should you rent out the property in the future.
Most of us are not property experts and are therefore not always across where the best areas to purchase property are. Factors such as future growth potential or best rental yield are not easily known. Even when purchasing to live in it is still important to consider future growth or rent potential as circumstances change and you want to get the best from your investment choice.
- Why not consider speaking with a property buyer’s agent to assist you in choosing where and what to purchase. They can work with you to help you choose the best property to buy for your situation.
Getting the right legal advice
Consider more than just basic conveyance to handle your contract for purchase. Should you buy your home or investment property in your personal name or say a family trust? For larger investment purchases such as buying 4 units in one development should I structure this in a company name? Are there any benefits to the way I structure this to save on things like GST, stamp duties etc?
- Getting the right legal advice prior to purchasing may help protect your investment in the future and save you cost’s at the start.
Always make sure you are insured correctly. Losing an important asset is one thing but losing your income will also make repaying your loan more difficult. How would you maintain your lifestyle if you lost your income?
- Ensure you have landlord insurance to protect against tenant damage or excessive rent arrears. Review your insurance regularly to make sure the level and type of cover is best for your needs.
- Cover your self against loss of personal income due to things like sickness and injury. Navwealth advisors can assist you determine what level of cover is right for you. In many circumstances this cover can be tax deductible.
- If you have existing income cover will it last as long as your loan will? Some policies only last 2 years. What if you are sick beyond this time?
For more information or to discuss your own mortgage needs or financial circumstances, please contact the office on (02) 9008 3000.
General Advice Warning: Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters.