Debt Management Program

Debt Management Program

Owning your own home is the great New Zealand dream, but the amount of interest you pay to achieve that dream can be a nightmare! Traditional Bank mortgages are structured in such a way that in the first 15 years of a 25-year mortgage very little capital is paid off the principal of the loan. For example, if you pay an average of 8.0% in Home Loan interest on a $100,000 loan taken over 25 years, your total payments will amount to $231,700. This is 2.3 times the original capital borrowed. This makes very little sense and demands consideration of the alternative finance options. Where other loans exist, including credit cards or personal loans, the interest rates are often much higher and cut more deeply into your savings capacity. This is why debt management is so important in a financial strategy. There are currently three main options for the early repayment of a mortgage: – 1. A cash lump sum may be used to partially or totally repay the debt. If this option is chosen, in most existing cases the availability of the cash is lost. 2. By increasing the level or frequency of the required repayment the principal is reduced at an increased rate, hence extinguishing the mortgage faster. Again, in most cases access to this repayment is lost and an additional burden is placed on your standard of living. 3. The interest generated by investing funds in an “offset” account is offset against the interest payable on the mortgage. Each option has its benefits, however, the underlying factor is that you need to outlay more money and...
Lifestyle Builder

Lifestyle Builder

Owning your own home is the great New Zealand dream, but the amount of interest you pay to achieve that dream can be a nightmare! Traditional Bank mortgages are structured in such a way that in the first 15 years of a 25-year mortgage very little capital is paid off the principal of the loan. For example, if you pay an average of 8.0% in Home Loan interest on a $100,000 loan taken over 25 years, your total payments will amount to $231,700. This is 2.3 times the original capital borrowed. This makes very little sense and demands consideration of the alternative finance options. Where other loans exist, including credit cards or personal loans, the interest rates are often much higher and cut more deeply into your savings capacity. This is why debt management is so important in a financial strategy. There are currently three main options for the early repayment of a mortgage: – 1. A cash lump sum may be used to partially or totally repay the debt. If this option is chosen, in most existing cases the availability of the cash is lost. 2. By increasing the level or frequency of the required repayment the principal is reduced at an increased rate, hence extinguishing the mortgage faster. Again, in most cases access to this repayment is lost and an additional burden is placed on your standard of living. 3. The interest generated by investing funds in an “offset” account is offset against the interest payable on the mortgage. Each option has its benefits, however, the underlying factor is that you need to outlay more money and...
Home Loan Tips

Home Loan Tips

Home loan tips 1. Add up those home loan fees 2. Additional repayments 3. Ask about ‘professional package’ discounts 4. Be careful of ‘honeymoon’ intro rates 5. Beware fixed rates 6. Can’t get a standard loan? There are alternatives 7. Caution the key in current housing market 8. Check if there are ongoing fees 9. Check your statements for errors 10. Compare loan features, not just rates 11. Consider a portable loan 12. Do you need a redraw facility? 13. Do your homework 14. Don’t fall foul of the taxman 15. Don’t rely solely on comparison rates 16.Ensure your mortgage broker really delivers 17. Keep accurate records 18. Look beyond the banks 19. Look for flexibility 20. Make the most of rate falls 21. Make your surplus cash work harder 22. Pay your loan off quicker with fortnightly or weekly repayments 23. Quit smoking 24. Save interest with offset accounts 25. Save with a line-of-credit loan 26. Use your home equity to borrow 27. Win rate discounts for bulk business 1. Add up those home loan fees Once you’ve saved up the deposit for a home, don’t forget to take into account all the extra fees that come with buying a house – some or all of these: stamp duty, legal costs, disbursements, mortgage insurance, pest inspection report, survey report, builder’s report, strata inspection report, loan application fee, valuation fee, registration fee, sundry fees like refinancing or switching fees. 2. Additional repayments Making additional repayments beyond what’s required in your minimum monthly repayment is one of the best ways to reduce the total interest paid and term of your...