When it comes to your mortgage, securing a competitive interest rate is important. But have you considered whether your mortgage is structured to suit your circumstances, cash flow and future plans?
Insights with Infinance by Brian Coogan
With several lending options available, understanding the differences can help you make more informed decisions.
Fixed-rate mortgages provide certainty by locking in an interest rate for an agreed period. This makes budgeting easier and protects you from rate increases during that time. However, restrictions can apply to additional repayments, and breaking a fixed-rate loan early may involve costs.
Floating-rate mortgages offer greater flexibility. You can generally make extra repayments whenever you choose, potentially reducing interest and paying off your mortgage sooner. The trade-off is that interest rates are generally slightly higher than fixed and can change, affecting your repayments.
For many borrowers, a split mortgage offers a practical middle ground. By dividing your lending between fixed and floating portions, you can enjoy some repayment certainty while retaining flexibility for additional payments.
There are also facilities worth considering. Revolving credit works much like an overdraft, allowing you to manage income and expenses through a credit facility secured against your home. Used carefully, it can help reduce interest costs.
Offset mortgages allow eligible savings balances, and sometimes qualifying linked accounts, to offset part of your mortgage balance when calculating interest. Your savings remain accessible, while the interest charged on your lending may be reduced.
The right option depends on your income, savings, spending habits, financial discipline and plans for the future. A structure that suits a first-home buyer may not be appropriate for a self-employed business owner or someone approaching retirement.
Ultimately, your mortgage is about more than the interest rate. Getting the structure right can improve flexibility, support your financial goals and potentially save you money over time.
At Infinance, we look at the bigger picture to help you understand your options and find a mortgage structure suited to your needs.
Thinking about your next mortgage move? Talk to Infinance.
For more on the above go to www.infinance.co.nz/insights
Written by Brian Coogan, Licensed Financial Adviser and Director at Infinance – Taupo