With interest rates at record highs, Australians are spending a record portion of their paychecks on mortgage payments, but there is a way to save a lot of money.
This can be a real struggle, but the reality is that there are great opportunities for many people to save money using their existing mortgage.
The challenge is that the mortgage market is complex and constantly changing, and knowing what’s best for you can be difficult.
The good news is that there are people who can help you figure this out — and do the work for you.
Where Can a Mortgage Broker Add Value?
A mortgage broker is someone who helps you prepare a mortgage, but they can do a lot more than that. A good mortgage broker can help you understand your borrowing capacity before you can. Buying a propertyso you can position yourself to make a real estate purchase for the amount you really want and in the time frame you really want.
But there is another great opportunity for savings that comes once you own the property, as a good mortgage broker will be able to help you make sure you get the best deal on your mortgage today and in the years to come.
In Australia, there is a clear bank.Loyalty tax“It can be very expensive.
This loyalty tax arises because banks often compete for new business customers, so they offer better deals and rates to entice people to change their mortgages.
You can save big on your mortgage by following this tip. Image: iStock
But once you become a customer, you don’t get as much love, and as a result your mortgage interest rate will become less competitive over time.
Basically, the short version is that if you set up a mortgage and then don’t change it for several years, you’re probably paying more than you should.
Statistics show that the difference between the interest rate offered to new customers compared to existing customers in Australia ranges from 0.5 per cent to 1 per cent.
With the average mortgage size in Australia being over $600,000, paying a slightly higher interest rate would be very expensive.
Paying 0.5% – 1% more in interest costs on a $600,000 mortgage means paying $3,000 – $6,000 more in interest each year.
If you want to maximize the money you have available to invest and build wealth, or just keep up with the cost of living, you need to keep the interest rates on your mortgage competitive.
A good broker will regularly review your current mortgages to make sure you are getting the best rate. He or she can negotiate with your current bank to get a better deal without having to change your mortgage, or he or she can help you change if that would be more beneficial.
How do mortgage brokers get paid?
Mortgage brokers get paid by the bank as a commission when they help you set up a new mortgage. This means that you can get help from a mortgage broker without paying anything out of your pocket.
It is worth noting that the interest rate and cost of your mortgage whether you go directly to the bank or through a broker is exactly the same.
In fact, it is often cheaper to deal with a mortgage broker because they are able to negotiate a better deal with the bank on your behalf.
Mortgage brokers can negotiate a better deal with the bank on your behalf. Image: iStock.
What to Look for in a Mortgage Broker
Not all mortgage brokers are created equal, so you need to choose your mortgage broker carefully.
A good broker will add a lot of value, but an average or poor broker can take a lot of money. When choosing a mortgage broker, there are a few things you should look for to put yourself in a position to get the best results.
The first and most important thing to look for is a broker who can set up mortgages with a wide range of lenders.
It may get a little technical here, but basically, every mortgage broker has to register with a bank before they can help their clients set up new loans with that particular bank.
If your mortgage broker is registered with only a few banks, this may mean that the options available to him (and you) are limited. On the other hand, if your broker is registered with most (or all) banks, this means that he can use any mortgage available in the country that may be suitable for you.
You will also want to look for a mortgage broker that is part of a large enough company to be able to take good care of you.
This is important when you are buying a property and when you have one (or more) mortgage.
If your mortgage broker works alone and does all the work themselves, or has a limited support team, it may affect your results.
If your broker has little or no support, it can be difficult for them to stay on top of your mortgage and keep your interest rates competitive. Limited support also means they may not have the ability to focus on you because they are juggling multiple tasks. This can be a problem when you need to get something done quickly. Time is of the essence every time you buy a property.
The roll
In Australia today, mortgage payments make up a large part of household spending – and this comes with a huge financial opportunity.
A good mortgage broker can help you create some big savings, both today and in the future.
They can help you save on interest costs, keep your mortgage competitive, and do the hard work of managing your mortgage. Take the time to do some research and see how this can help you, and you can take advantage and save a lot of money.
Ben Nash is a financial expert, commentator, podcaster, financial advisor and founder of Wealth Axisand author of a forthcoming book, Millionaire Virgin.
Ben runs regular educational events about money to help you save more and invest smarter. You can find all the details Book your place here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs.
Therefore, you should consider whether the information is appropriate to your circumstances before acting on it and, if necessary, seek professional advice from a financial professional.
