Thinking about the iceberg

Rate matters, but there's much more to sound mortgage structuring.

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As many clients continue to roll off fixed rates, particularly with multiple rate cuts and tighter cash flow for families, clients are increasingly reviewing their loan structure in tune with banks finally starting to compete again to win new customers.

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Some banks have been fighting to keep customers at 11:59 p.m., throwing the kitchen sink with a great deal once they know they are leaving, but for the most part, banks fighting to keep you have not been the case for the last couple of years.

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Recently, home loan pricing has looked much better for investors and, to a limited extent, homeowners. However, when people look at their mortgages, they often focus solely on the rate, not all the other arguably more important parts of a sound mortgage strategy.

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Often, the simplest structure change to reset your loan term from, for example, 26 years back to 30 years would reduce your repayments from $6,200 to $5,750 a month per $1,000,000 of debt and, in turn, keep $5,400 a year in your offset account.

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Secondly, with better valuations, which are often possible, cash flow could give you a buffer and the potential to consider other things, such as renovation and investment. 

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With the continued attack on the tax advantage to superannuation and limits on concessional contributions often being maxed out already, the need and desire to invest more makes sense, whether buying an investment property or building a share portfolio outside super.

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It’s always wise to consider releasing equity rather than buying shares with cash and reassessing any shares you own or acquire through workplace employment share schemes to optimise tax deductibility.

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Mortgage strategy is an ongoing exercise in tinkering, tweaking, and optimising to lower rates, protect tax deductibility, create opportunity and best manage repayments. 

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If you haven't in the last 12 months, it makes sense to do a once-over. While further rate cuts are likely to come, you should know what's best to do now or decide to review again six months post.

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