Creating a borrowing strategy is an intelligent way to approach your first mortgage or refinancing to help you climb the property ladder.
Finding the best deal in the market is a challenging task when various lenders offer so many choices.
As an experienced local agent, I find that the most successful and trouble-free purchases are completed by buyers on top of their financial position.
Here are a few observations to help you organize your borrowing strategy.
No lender is the same
Different banks offer different loans. No lender has the same risk profile as the others. So, don’t be surprised when you get a variety of responses when you approach them for a loan.
Low may not be the go
The lowest interest rates often come with the most inflexible loans. Be careful not to trap yourself in an arrangement that costs you more than the cash you save on a low interest rate.
Seek flexibility
Flexibility is essential in a mortgage because your circumstances are highly likely to change over the years. For example, you may want a loan that will allow you to pause payments during ill health or time when you have kids.
Creative accounting
Another popular type of loan strategy is to have an offset account – or a transaction account – linked to your loan. Money in this account works to minimize your interest payments even though you can withdraw funds and make payments into it. In the long term, this type of account can save you thousands of dollars in charges.
Fixed Rates
When your rates are fixed, then the cost of your borrowing is stable. Your mortgage repayments will be consistent. Many borrowers ask the bank for a fixed rate when rates are low.
Variable Rates
The difference with fixed rates is that your payments can go even lower if the cost of borrowing falls further. That’s a win for you. But all coins have two sides: rates can go up, and that is likely to hit your cash flow.