You Must Consider All Costs
When comparing loans it is important to take into account all costs associated with the loan including interest rate, ongoing fees, establishment fees, transaction fees (if applicable) and any early repayment fees (break costs). The easiest and most effective way to compare all these costs is by using the Average Annual Percentage Rate ("AAPR"). This reference rate takes into account all costs associated with each mortgage product and expresses the total cost as a percentage of the loan. We calculate AAPR's over 3, 5, and 10 years as borrowers time horizons vary from client to client. This also allows clients to assess the impact of any early repayment fees, should they exist. We recommend that clients focus on the shorter time periods (such as 3 and 5 years) to ensure flexibility is maintained. These rates are set out in ProSolution's Lending Analysis Report.
These are just some of the considerations we take into account when assisting clients. Save time and money by taking advantage of ProSolution Private Clients knowledge by - contacting us now!
The Truth About Offset Mortgage Products!
Some banks regularly make claims that mortgage offset products save borrowers hundreds of thousands of dollars and help them pay their mortgage off years earlier. But do the figures really stack up? For the answer to this question read this press release (which ended up being discussed in Personal Investor magazine).
Other Tips...
1. Contribute as much as possible – The more you contribute to a purchase (and therefore the less you borrow) the more money you will save in the long term. Every $5,000 less you borrow saves you $6,400 over 30 years (at 6.50%).
2. Mortgage insurance – Try to borrow less than 80% of a property’s value to avoid the cost of mortgage insurance. In some certumstances we have been successful in getting mortgage insurance waived for some of our clients that have borrowed more than 80%of a property's value. This has saved them literally thousands of dollars.
3. Extra repayments – You should be aware of the financial benefits of making small extra repayments. For example, if you paid $100 extra per fortnight on a $350,000 loan it would save you over $94,000 in interest over the life of the loan (based on an interest rate of 6.00% per annum).
4. Interest Rate Increases – Consider the impact of interest rate increases on your loan repayments. For example, an increase in interest rate from 6% to 7% will increase fortnightly repayments by $116 on a $350,000 loan.
5. Lending structure – It is important to consider the structure of the loan in terms of cross securing properties, applicants to the mortgage and owners listed on the property’s title. These factors can affect your flexibility and potential taxation deductions (for investment properties).
|
