Why your mortgage structure is king

As a mortgage broker, perhaps the most common question I am asked is, “What sort of interest rates can you get?”

While this is a very important question to consider when borrowing money, I don’t view it as the most important.

One of the most overlooked aspects of borrowing is the structure of the loan.

Did you know that lenders will allow you to split a loan into pieces, having individual interest rates, loan types and terms?

This can effectively hedge your position in the event of rising interest rates. Rather than having your entire loan exposed to higher interest rates, only a portion of the lending is. You also gain the opportunity to review a portion of the lending more often, giving you more flexibility and control.

This allows flexibility to make extra payments, which effectively reduces the loan term and saves significant money on interest. Without the proper structure in place, you could potentially be penalised for such behaviour.

This goes both ways, as a well-planned structure may make use of a revolving credit or offset facility, which reduces interest while you have a bit of extra savings, but also allows you to access these funds if circumstances change.

Every client will require a unique structure depending on their circumstances, behaviour and financial goals. Each lender will have different products, policies and rules for structuring.

Next time you speak with a broker or bank about borrowing money, be sure they figure out exactly what structure suits your needs.

If not, find someone who is interested in finding the best mortgage structure for your unique needs.