So you’ve taken the big financial step forward and decided to get onto the property ladder. You have that all important 20% deposit for your property and taken your mortgage out for a 30 year term. That 30 years might not seem relevant at this point in time but it should be. Getting a good structure with your lending right from the beginning can save you thousands in interest and knock years off the life of your mortgage.There are a few questions you should consider when structuring your lending.
1. Should I fix or float?
Fixing your mortgage can be beneficial if you are on a tight budget. You know exactly what your payments are going to be each fortnight / month and for some people that works well. If you come into money (work bonus if they still exist) then it’s beneficial to have some of your loan floating so you can pay it straight onto the mortgage.
2. Can I afford the monthly repayments?
Don’t make your monthly payments too big if it’s going to make your cash flow tight each month. This is about the time the car usually requires some expensive maintenance or your teenager loses their phone. Speaking from experience!!
3. Should I increase the monthly payments to shorten the life of the loan? This is a good option if you have spare cash flow each month. There are better ways of decreasing the life of the mortgage though without impacting your monthly budget.
4. How will I be placed if the market turns and rates go up?
Financial markets move constantly so risk mitigation is essential. Stay in touch with your broker and keep an eye on current mortgage rates.
5. Do I have a backup plan if things should go wrong with my current financial situation?
This is where a well tailored insurance package comes in. Lenders love their clients to be insured and you’ll be pleased you took out that policy too should the unthinkable occur.
Each mortgage is going to have a differing structure as each individual is at a differing stage in their life. To make sure your mortgage is working well for you contact your local mortgage broker / adviser or personal banker. By taking a few extra hours you could save yourself thousands in interest over the term of the mortgage so it’s definitely worth
doing.
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