When was the last time you carried out a mortgage review? Never? So many people believe that once the mortgage agreement is signed and sealed, that’s it, the deal is done.
And generally, this is how mortgages work, but if you have the best mortgage advisor, they will tell you how important it is to review your mortgage regularly. In fact, they will be able to manage your mortgage actively and advise you when circumstances arise that could save you money.
Read on to learn how mortgages can be refinanced and restructured over time.
Breaking A Fixed Term Contract
If you take out a mortgage with a fixed rate, you are committed to that interest rate for the duration of the fixed rate term. It is possible to break this fixed-rate term and incur a penalty fee. What most people are unaware of, though, is that legally, lenders are not entitled to make a profit from you breaking your fixed interest rate early. They are only permitted to recover any losses they have incurred, calculated according to a specific formula.
The best mortgage advisors will tell you that frequently, the bank can make a profit from you breaking your fixed interest rate early, and depending on the new interest rate they offer you, so can you.
Three-Step Process Used By The Best Mortgage Advisors
- Refinance - when interest rates drop, it is beneficial to investigate the option of breaking your fixed interest mortgage agreement early to take advantage of the lower rate, despite the penalty fee.
- Restructure - the best advice here is to keep your mortgage repayments the same, rather than adjusting them downwards on the new, lower rate. You can also adjust your payment schedule to fortnightly as these more frequent regular payments can save thousands in interest over the period of the mortgage.
- Mortgage Match - using what is referred to as the “safe harbour” formula, you can benefit from a lower interest rate by breaking your fixed agreement early, and the lender has the option of lending the money at a higher rate - resulting in a win-win situation for everyone.
These steps result in happy clients that can save thousands of dollars and reduce the repayment period significantly.
If you are looking for the best mortgage advisor, get in touch with Simpler today. We offer a free service, can negotiate better mortgage rates, and give you the best advice on refinancing, loan structures, budgets, and interest rate forecasts.