Structuring Your Mortgage

Borrowers will often negotiate hard to get a tiny amount off an interest rate but what is often not understood, or appreciated, is the power of structuring lending in the correct way.

Whether you are looking to pay debt of quickly, increase a property portfolio or simply set-and-forget when it comes to your mortgage, there are many different structuring options available.

Not only is every borrower different but even an individual’s needs change over time. First homes, investment properties, marriages & divorces, children and retirement – every stage comes with different structural borrowing needs.

Structuring tips

Self-Employed – People who own businesses often have cashflow fluctuations. A portion of borrowing on Revolving Credit allows these fluctuations in income to be absorbed by this type of account. They allow an effective place to put extra funds in the good months and a pool of funds to rely on in the bad months

Investment lending – Borrowing for an investment is different that borrowing for your own home and the interest of this type of lending is tax deductible. For this reason, many investors chose to have an extended interest-only period of this type of lending

Conservative Borrowers – People who are concerned about rate fluctuations can fix in for a long period. This gives them the comfort of knowing that their mortgage payments will remain the same for as long as the loan is fixed

Aggressive debt payment – As with Self-Employed borrowers (above) a Revolving Credit portion allows you to repay debt quickly and gives the ability to have 100% of your income go into this type of account but still have access to funds at any stage

Rate Shock – This is where all, or most, of your borrowings are on one fixed rate. If the rates have risen dramatically between the time you first fixed and the time you come to refix then the payments can increase dramatically. A way of lessening the chance of this rate shock is to split the lending over several different rate terms meaning everything will not come off fixed at once

Interest Rates – The rate of interest that you pay is always a factor and effects all the points above. There is always a good argument for having at least some of your mortgage fixed to protect against rate rises and give some certainly to monthly costs.

Good borrowing habits

For most people, borrowing money for a home is the price you pay for owning that property. Like anything in life, you do not want to spend every day worrying about the amount of debt that you have. A good habit to get into is simply to have a review of where you are at and what your borrowing needs are now, and in the foreseeable future, every time you refix your lending.

We are here to listen and help.

Call the Edge Team today to discuss all of your borrowing requirements.