Do You Have The Right Mortgage For Your Lifestyle?

Most Australian Home Buyers have a amortgage that's been designed by a lender, and for a lender. This means your probably paying way too much for way too long to own your home. But - Why Is It So?

Making Sense Out Of The Market.


There are an enourmous number of Home Loan produsts available from a wide number of Prime and Sub Prime lenders in the Australian market place. Choosing the Right One For Your Lifestyle may not be as simple as you would want it to be.

Most Lenders and Brokers are fixated on Interest Rates but is that really all that Home Loans are about? If it were, then the lender offering the lowest Interest Rate should get all of the home loans. It stands to reason doesn't it? Still, what else can the lenders, and most brokers, offer you if not the potential for a lower interest rate? It's not like they actually work for YOU is it?

Will Using A Brokerage Service Save Or Cost You Money?

Most Mortgage Brokers do work for you to some degree, but can you really be sure that they're not working at least as hard for the Lender as well? After all, who pays them? Do You? Not usually! So, if the Broker gets paid by the Lender? And if the Lender only works for themselves..? Can You Be Sure You're Getting The Best Mortgage For YOU?

Why do you think Lenders are in the business of financing mortgages? For the money! Simple and easy. They're in it to earn as much money as they can. They've got Shareholders and Boards of Directors the have to please. So where do you fit in to their schemes? They're not there to be nice to you or to me. They're there offering you a means to own or buy a home. But it's basically always on their terms.
What about Mortgage Brokers?
Why are brokers in the business of arranging Mortgages if not for the money?
Well, most mortgage brokers have predominantly come from within the Banking sector in the first place. Many are ex-bank employee's and bank managers who believe they can earn a better income as a Mortgage Broker than they could in their old jobs.

If that's the case, and I believe that it is in the majority of cases,
then what can an ex bank employee offer you that a bank can't?
Probably not a lot.
They probably never even think of it!

What did your last Lender or Mortgage Broker do for you?
Again, probably not a lot beyond sign you up on a Mortgage Application
and see the loan through to settlement. Am I right.

Brokers SHOULD offer you a better, different kind of sevice.

What about Mortgage Brokers? Why are brokers in the business of arranging Mortgages if not for the money? Well, most mortgage brokers have predominantly come from within the Banking sector in the first place. Many are ex-bank employee's and bank managers who believe they can earn a better income as a Mortgage Broker than they could in their old jobs.

If that's the case, and I believe that it is in the majority of cases, then what can an ex bank employee offer you that a bank can't? Probably not a lot. They probably never even think of it!

What did your last Lender or Mortgage Broker do for you? Again, probably not a lot beyond sign you up on a Mortgage Application and see the loan through to settlement. Am I right?

And what did the Mortgage Broker get out of the loan? Nothing from your pocket that's true. But in almost every case the Mortgage Broker will have received an upfront commission of about 80% of 0.80% of the loan value; and on a $250,000 Mortgage that's about $1,600.00 Not a bad income is it?

On top of this, most Brokers will receive what's called a Trail Commission as well. This is a monthy commission of about 80% of .275% of the value of the Mortgage, or about $55.00 every month - for as long as your mortgage is with them.
So if you're with a lender for 30 years
your Broker will earn a total fee from the lender for that one loan of around $21,400 in up-front and trail commissions.

Now don't get me wrong, I have no issue with Mortgage Brokers receiving this sort of income from helping you get through the minefield that Loan Writing can be. After all I'm a Mortgage Broker myself. But I do take offense at lack of effort they often put in to finding you the Right Mortgage For YOU.
Usually, it's simply the easiest Mortgage to write, if not the most profitable Mortgage, for THEM.

Ask Your Self These Questions.

Here's a simple exercise to see if the Lender or the Broker you last used got you the Best Mortgage For You or the best Mortgage for them.

Add the number of YES answers and Take away all NO Answers

Has Your Lender or Broker contacted you on a regular (say at least quarterly) basis for any reason whatsoever?

Has your lender contacted you regularly (say quarterly) to make sure youre on track with your Mortgage, your Financial Future and the like?
Not just by sending statements either - Real contact by phone or mail.

Has your lender or Broker ever explained the differences between the various mortgage products available through their company?

Has your lender or Broker ever explained the differences between the various mortgage products available through other Lenders?

Did your lender give you any options about which type of mortgage would best suit your lifestyle and financial needs and did they explain how each option would benefit or cost you?

Would you be able to say that, since you took out the mortgage, you have made noticeable (better than say $600 a month) and regular inroads in reducing the debt of the Mortgage each month?

Does your Lender or your Broker Review your Mortgage with you at least once a year?

Has your lender ever told you about Debt Reduction Strategies and hoow they can save you tens of thousands of dollars in Interest and years of the term?

Total the Scores and see if your Mortgage is Working for YOU or if you're working for your Mortgage.

A score of 8 means your Lender Broker is worth his her weight in Gold

A score of 4 or more means the Lender or Broker is above average but still has a long way to go to earn their upfront or trail.

A score below 4 is probably about average. And that's a very sad statistic. Your Lender or Broker probably means well but they're just not doing the right thing by you.

A score of 0 means you've probably only ever dealt with a Lender and you really do need to take a good look at where your Mortgage is heading. Whose money is itr that your giving them? Yours isn't it? Shouldn't you keep as much of it as you can?

Can You Fix It?

You can repair the damage an Broker or Lender has caused you, by finding another Broker who's professional enough to see that there are Mortgage Structures out there and there are Mortgage Products. They need to understand that setting up Mortgage Structures is very different to simply setting up Mortgage Loans. Once you've found such a Broker - Keep them, they're few and far between

What makes a Good Mortgage Structure?

Speaking from our own point of view, a good Mortgage Structure goes beyond simply helping someone get a mortgage through a lender. It includes:
* making sure the Mortgage gives them the best chance of getting out of the debt in the shortest possible time without necessarily costing them any more each month to do it.
* Keeping the lenders ongoing Fees down to zero or at least to a bare minimum.
* Supporting the client for a minimum of two years with mentoring and management of their Mortgage structure.
* Providing the client with Monthly contact calls for at least two years after the loan has settled.
* Carrying out an annual review of the Mortgage Structure, it's success and it's failures.
* Ensuring that adequate exit strategies are in place to take care of the unexpected.
It means making the client the centre of the Broker's world. Not the lender.

One Final Quiz to intrigue the mind.

When comparing your current mortgage against the following Mortgage Reduction Criteria, which mortgage structure would you have chosen had you been give the choice?
* If your bank had of offered you a mortgage that:
1. Allowed you to get out of debt years and years sooner without necessarily paying any more per month to do it.
2. That allowed you to save tens to hundreds of thousands of dollars in Interest, and had NO ongoing fees and charges.
3. That gave you the opportunity to use the total amount of the mortgage funds for the whole of the mortgage term - to do anything you needed or wanted like, Buy Investments such as property,
superannuation, shares, etcetera.OR b. Pay for unexpected and unplanned medical or other personal or business crisis issues. OR
c. Allowed you to fund your lifestyle needs throughout the term of the mortgage.
Would you have chosen the mortgage you currently have? Or a mortgage with the features and benefits Ive just described?
Additionally, If your bank or Broker had offered you a mortgage:
* That Allowed you unlimited Free EFTPOS, ATM
and Cheque transactions each month.
* That only ever charged you interest on
the real amount of money you owed on any given day. In other words, where they didnt lump the whole 30 years worth of Interest in to the loan
and charged that from day one.
* If they had offered you a mortgage where you never had to ask permission to draw money down,
even right back to the maximum limit of the loan;
one where you never had to explain your reasons,
and never needed to re-apply for the funds or
take out additional supplementary or personal loans.
Would you have chosen that mortgage, or the mortgage you have now?
Finally, let me ask you this:
If you weren't considering re-financing or taking out a new mortgage
before you read this,
Could you now consider at least, if the
Mortgage You Have Is The Best Mortgage
For YOU - Or Do You Think It's Just
The Best Mortgage For The Lender?

Would you prefer a Mortgage as Ive described above,
or one similar to the mortgage you now have?

It's Your Money After All Isn't It?
Who should you give it to?
Your Family and Your Lifestyle?
or the Lender?

Having a mortgage is only the beginning. Having the right one is imperative. If you haven't got the right mortgage your in for an expensive battle. As an example: if your repayments are $2000 a month on a 30 year mortgage you will pay the Lender $720,000 for your home. Unless you sacrifice your lifestyle by paying more in each month to get rid if the debt.
Is that your idea of fun? We don't think so.

By: JohnVDW

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