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5 Tips on making it through the mortgage maze!
1.BEAT YOUR BANKER - USE YOUR BROKER
Getting a mortgage is a lot like buying a car – you need to know what you really need or you’ll end up paying $3,000 for a ‘sports pack’ on your new Kia Rio.
With a mortgage, most of the fancy bells and whistles (a line of credit, the ability to fix a portion of your loan, and so-called ‘repayment holidays’) are where lenders make their margins. For the average borrower they’re unnecessary.
2. YOU ARE SPECIAL
It used to be that banks gave ‘package deals’ (as much as 0.7 per cent off the standard variable, fee-free banking, or both) to entice good customers, like doctors, lawyers and bikies. Yet in a cut-throat competitive marketplace everyone is special – so tell your banker that you want a package deal - better still let us do it for you - we should be able to get .80-1% off depending on your loan amount.
Trust me, they can afford it.
3. THE $90,000 SOLUTION
Despite all the rubbish that banks spin, there really are only two ways to get rid of your mortgage quicker: lower your interest rate, and increase your repayments.
Let’s say you’re five years into your $350,000 mortgage. Putting in an extra pineapple ($50) a week will cut $90,000 in interest and a massive five years off the length of your home loan. That’s the power of compound interest working for you, rather than the bank.
4. FORTNIGHTS FOR FREEDOM
Make sure you pay your mortgage fortnightly not monthly. Why? There are 12 months in a year, but 26 fortnights. If, for example, you repay $1,000 monthly you’ll repay $12,000 a year. Yet if you pay $500 fortnightly you’ll end up repaying $13,000 – or an extra $1,000 a year!
5. WATCH THE EXITS
The fine print in many a mortgage document may as well be typed in gold print, because that’s where the banks make their dough – especially if you’re thinking of refinancing within three years.
Here’s you: “I’m not going to pay my home loan off in the next 10 years so why should I bother worrying about exit fees?”
Here’s me: “Because the average home loan is refinanced about three and a half years in. If you’re not careful you could be hit with thousands of dollars in exit fees – and be effectively locked in to a costly deal that no longer meets your needs.”
So while the banks may employ dumb economists, they’ve definitely got smart marketers. And when they see rates rising (generally about six months before we do), they start increasing the costs to fix.
That’s why my advice is to take the energy that you’d normally spend playing the game of interest rate roulette, and channel it into a solid strategy of paying back your (dirt-cheap, no-frills) loan as quickly as you can!
Kindly sourced via www.barefootinvestor.com.au
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