Mortgage tips for the modern day home loan
Understanding what to do with money is never straightforward and, in the Age of the Great Financial Crisis, it has taken on a whole new level of complexity.
The best means to capitalize on low interest rates in terms of your mortgage is an area debated by economists and financial planners.
Recently I have been reading up on some key points about mortgages and how to save money on mortgages – something that is getting quite complex with the amount of options available.
Here are a few take-home points from the experts:
Know where to look
A good starting point is the comprehensive Your Mortgage website. If you like watching the rise and fall of housing prices, or enjoy in-depth accounts of housing affordability statistics, this is your website.
The Housing Industry Association has several publications on housing economics and in-depth forecasting models on what might happen to housing prices, interest rates and economic growth. Being informed is to be prewarned, so arm yourself with as much knowledge as you can get your hands on.
Consumers are confident
According to experts, consumer confidence in housing prices is surprisingly high and the days of the GFC are but a distant memory. Loans have increased for all of the Big Four over the last year. It is hoped that, in the wake of the Australian Government investing as much as $3.4 billion in residential mortgage-backed securities, there will be more competition and will yield downward pressure on mortgage rates.
Pay extra
Financial planners are suggesting that taking advantage of today’s low interest rates and paying extra is the way to go. Darren Johns, with Align Financial, encourages that any money surplus to a targeted spending plan should go on the mortgage or be put into an accessible savings account. After all, with official interest rates set to rise 1% by the end of this year, it is suggested you’ll stand to save money (and get your teeth into your mortgage) if it’s paid back now.
To fix or not to ix, that is the question
There’s a great article in The Globe and Mail that discusses the merits of fixed interest versus variable here.
Unsurprisingly, there are risks and benefits with both choices. Your choice depends a lot on your risk tolerance and investment personality. If you lock in for ten years, the rate you pay now will be significantly higher but you’ll have the security of knowing what price you’ll be paying in 2020.
Conversely, staying with variable interest rates will save you money now as rates are currently so low.
In Australia, demand for fixed loans are at an all time low with consumers shying away for the extra expense of a fixed interest rate loan. What the landscape will look in a year’s time is anybody’s guess.
Communicate
The ghost towns of the US are an image still swimming in public consciousness, but representatives of the banks suggest getting in touch if you should run into difficulties. According to a representative of ANZ, the bank is much more interested in collecting interest than foreclosing on a house. Reduced repayments or deferral are options that can be canvassed with your lender.
House prices, forecasts, interest rates and consumer confidence are all things talked about as if they are science, and yet seem to have the irrationality of a Pollack painting.
Finding a lender you trust and a financial planner who can give you sound advice is half the battle.
What are your thoughts on mortgage in this day and age?
Drop us a comment below.
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One Response for Mortgage tips for the modern day home loan
Hi There,
As a large online mortgage firm we have experienced a large shift from the Non Bank lenders to the major banks who have now unfortunately taken too much % of market share…Our Private lenders have also been inundated with work as the funding restrictions imposed by these banks has basically created a new funding facility for the customer looking outside the box of traditional finance.
A mortgage in its true sense is all the same however, the mortgage that one might require these days needs to be shopped as the lenders look for safety first and scan their approvals for the cream of the crop….
We do believe things will start to change again once conditions improve but never how it used to be that’s for sure!
Cheers,
AMC.
