For most Australians, their mortgage is one of the biggest financial commitments they will ever make.
Yet when people think about building wealth, they often focus on investments, superannuation and savings — while treating the mortgage as a completely separate issue.
It isn’t.
The way your home loan is structured and managed can have a meaningful impact on your cash flow, investment strategy, tax position and ultimately how effectively you build wealth over time.
That is why a mortgage review should be about much more than simply asking, “Can I get a lower interest rate?”
Depending on your circumstances, features such as a single or multiple 100% offset accounts, redraw, fixed or variable rates, loan splits and repayment arrangements can all affect how efficiently you manage your money.
For example, an offset account can allow surplus cash to reduce the amount of your loan on which interest is calculated, while keeping the money accessible when you need it.
Multiple offset accounts may also help you organise cash for different purposes, such as household expenses, savings or future investments.
And as your financial circumstances become more complex, the way different debts are separated and structured can become increasingly important.
The right loan structure isn’t necessarily the one with the lowest advertised rate. It is the one that works most effectively with the rest of your financial strategy.
“Should your surplus cash continue to go towards the mortgage, or could some of it be working towards other financial goals?”
Paying down your home loan can provide certainty, reduce interest costs and build equity. But there may also be times when investing, contributing more to superannuation or retaining accessible cash becomes an important part of the overall strategy.
There is no universal answer.
Your income, stage of life, risk tolerance, tax position, investment objectives and broader financial circumstances all need to be considered.
This is where mortgage advice and financial planning can work particularly well together.
The mortgage doesn’t need to be viewed simply as a debt to eliminate. It can also be considered in the context of the broader strategy for building and protecting wealth.
Equity in your home may potentially be used to help fund an investment, but how that lending is arranged matters.
Keeping different purposes of debt appropriately separated, considering how investment lending is structured and planning ahead for future borrowing can all become important considerations.
These are areas where mortgage advice and financial advice need to work together. The mortgage structure should support the investment strategy rather than being considered separately from it.
Even a relatively small difference in interest rates can add up over many years. And as your circumstances change and lending markets change, the loan that was appropriate when you first bought your home may no longer be the best fit today.
However, a mortgage review doesn’t automatically mean refinancing.
Sometimes the right solution is to stay with your existing lender and negotiate a better rate. Our more than 25 years of working with banks and lenders provides valuable insight into how lenders price and assess loans, and where there may be opportunities to improve the terms without changing lenders.
In other cases, changing the structure, consolidating certain debts, adjusting repayments or moving to a different lender may make sense.
The important thing is to make sure the mortgage still stacks up against your current circumstances and future plans.
You may start with a first home, then renovate or upgrade, build significant equity, buy an investment property, receive an inheritance, change careers or start preparing for retirement.
Each of those changes can create opportunities — or reasons to reconsider how your debt is structured.
A loan that was a good fit five or ten years ago doesn’t automatically remain the right fit forever.
The objective isn’t necessarily to have the lowest possible interest rate or to pay off your home loan as quickly as possible.
The objective is to have a debt strategy that is appropriate for your circumstances and aligned with what you are trying to achieve financially.
For some people, that will mean becoming mortgage-free sooner. For others, it may mean balancing mortgage reduction with investing or other wealth-building strategies.
Either way, your mortgage is more than just a home loan. It is an important part of your overall wealth strategy.
Speak to your Stonehouse adviser today to arrange a review of your home loan.
Yet when people think about building wealth, they often focus on investments, superannuation and savings — while treating the mortgage as a completely separate issue.
It isn’t.
The way your home loan is structured and managed can have a meaningful impact on your cash flow, investment strategy, tax position and ultimately how effectively you build wealth over time.
That is why a mortgage review should be about much more than simply asking, “Can I get a lower interest rate?”
Your loan structure matters
A competitive interest rate is important, but the structure of your loan can be just as important — and sometimes more important.Depending on your circumstances, features such as a single or multiple 100% offset accounts, redraw, fixed or variable rates, loan splits and repayment arrangements can all affect how efficiently you manage your money.
For example, an offset account can allow surplus cash to reduce the amount of your loan on which interest is calculated, while keeping the money accessible when you need it.
Multiple offset accounts may also help you organise cash for different purposes, such as household expenses, savings or future investments.
And as your financial circumstances become more complex, the way different debts are separated and structured can become increasingly important.
The right loan structure isn’t necessarily the one with the lowest advertised rate. It is the one that works most effectively with the rest of your financial strategy.
Balancing debt reduction and wealth creation
As your financial position improves, an important question can emerge:“Should your surplus cash continue to go towards the mortgage, or could some of it be working towards other financial goals?”
Paying down your home loan can provide certainty, reduce interest costs and build equity. But there may also be times when investing, contributing more to superannuation or retaining accessible cash becomes an important part of the overall strategy.
There is no universal answer.
Your income, stage of life, risk tolerance, tax position, investment objectives and broader financial circumstances all need to be considered.
This is where mortgage advice and financial planning can work particularly well together.
The mortgage doesn’t need to be viewed simply as a debt to eliminate. It can also be considered in the context of the broader strategy for building and protecting wealth.
The structure of your debt can become even more important when you invest
If you own, or are considering buying, an investment property or share portfolio, the way your borrowing is structured can have longer-term implications.Equity in your home may potentially be used to help fund an investment, but how that lending is arranged matters.
Keeping different purposes of debt appropriately separated, considering how investment lending is structured and planning ahead for future borrowing can all become important considerations.
These are areas where mortgage advice and financial advice need to work together. The mortgage structure should support the investment strategy rather than being considered separately from it.
Don’t overlook the interest rate
While the rate isn’t everything, it still matters.Even a relatively small difference in interest rates can add up over many years. And as your circumstances change and lending markets change, the loan that was appropriate when you first bought your home may no longer be the best fit today.
However, a mortgage review doesn’t automatically mean refinancing.
Sometimes the right solution is to stay with your existing lender and negotiate a better rate. Our more than 25 years of working with banks and lenders provides valuable insight into how lenders price and assess loans, and where there may be opportunities to improve the terms without changing lenders.
In other cases, changing the structure, consolidating certain debts, adjusting repayments or moving to a different lender may make sense.
The important thing is to make sure the mortgage still stacks up against your current circumstances and future plans.
Your mortgage should evolve as your life changes
Your financial position at 35 may look very different from your position at 45 or 55.You may start with a first home, then renovate or upgrade, build significant equity, buy an investment property, receive an inheritance, change careers or start preparing for retirement.
Each of those changes can create opportunities — or reasons to reconsider how your debt is structured.
A loan that was a good fit five or ten years ago doesn’t automatically remain the right fit forever.
The bigger picture
Your mortgage, superannuation, investments, cash flow and other financial commitments all form part of the same financial picture.The objective isn’t necessarily to have the lowest possible interest rate or to pay off your home loan as quickly as possible.
The objective is to have a debt strategy that is appropriate for your circumstances and aligned with what you are trying to achieve financially.
For some people, that will mean becoming mortgage-free sooner. For others, it may mean balancing mortgage reduction with investing or other wealth-building strategies.
Either way, your mortgage is more than just a home loan. It is an important part of your overall wealth strategy.
When was your mortgage last reviewed?
If it has been a few years — or if your circumstances, goals or investments have changed — it may be worth reviewing whether your current loan structure is still doing its job.Speak to your Stonehouse adviser today to arrange a review of your home loan.
