(03) 9020 2905When you decide that you really hate something, it’s funny how you can see all of the faults so much more clearly.
Like the snivelling moron you sit next to at work, who is not only lazy and a slob in the kitchen, but it turns out he’s also a liar, disrespectful and a mummy’s boy.
Or the noisy neighbours who have screaming matches after midnight, the poorly designed intersection, or the umpire that cost you the game.
They have no redeeming features. Absolutely everything about them is wrong. Life would be better if they didn’t exist. That might not be fair. But it’s the way we feel.
It’s the same way many people feel about their mortgage.
We love the “Great Australian Dream”. We love the feel of bricks and mortar. And we want to benefit from their generally rising values.
But we hate the bastard banks and the mortgages they lump us with.
Look, if that’s you, it’s time to flip your thinking on this. You’re either going to be saddled with a mortgage for a while if you’re looking for a property, or you are already carrying one.
Time to grow up. You need to learn to love your mortgage. It’s going to be around for a while. Get to know it a little better. And if you do, you might be surprised at what it can do for you.
There is plenty to love about a mortgage. Let me enlighten you.
Offset accounts: The greatest savings accounts in our solar system. Everyone needs some savings. Money in an offset account saves interest, which is usually twice as good as earning interest.
If you have $30,000 sitting in your offset account, with an interest rate of 5 per cent, you are saving $1500 a year. Tax free.
If you have $30,000 sitting in a high interest savings account, you might be earning 3.5 per cent, or $1050. But you have to pay tax on that. The “average” Australian is going to lose $362.25 in tax, leaving you with $687.75. Higher earners will lose more, making offset accounts even better.
As I said, savings in an offset account are twice as good.
Redraw accounts: In many ways, a redraw is like an offset account. It saves you interest in the same way. But it tends to be in a separate account. It’s usually not available, or viewable, when you pull money out of the hole in the wall. A fantastic way to “hide” savings for yourself, while saving money on your mortgage.
Credit cards: If you can use them properly – which means paying them off in full, EVERY month – then you get to use a few thousand dollars of the bank’s money for free. That money sits in your offset or redraw account for an extra month, until you pay off your card, saving you further interest.
Leverage: In several senses of the word. First, the loan itself has allowed you to buy something you otherwise wouldn’t have been able to buy. Second, you have a commodity (debt) that competing financial institutions want and will compete for.
It’s not hard to switch banks nowadays (though switching direct debits can still be a bit tiresome). And your bank knows that. Therefore, if you feel so inclined, getting a better deal from your bank can often be as easy as pointing out to them that someone else wants your business.
Find a lender willing to offer you a better deal. Show your bank. If they don’t jump at the chance to retain you as a client, switch.
The “better offer” will usually come in the form of a lower interest rate. But don’t forget to put some value on the other products offered by the lender, particularly those in professional packs, which you’ll be paying for anyway.
A mortgage will, short of childless aunties dying and leaving you a big inheritance or your lucky numbers coming up, be a constant companion for a while.
Learn how to pay the mortgage game. Start by simply not hating it as much. Look for some positives. It allowed you to get this house, didn’t it?
If you’re going to live in each other’s pockets for a decade or two, like those neighbours, make friends with your mortgage.
It has redeeming qualities. You just need to open your eyes.
Bruce Brammall is the principal adviser with Castellan Financial Consulting and a licensed mortgage broker (www.castellanfinancial.com.au). E: bruce@castellanfinancial.com.au.