Structuring Your Mortgage to Save More Money

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Doctors typically have a higher-than-average income, so when you walk into a bank, you’ve got more lending opportunities than your average home buyer. However, as MedCapital’s Jon Collier explains, not all mortgages are created equal and there’s no one-size-fits-all.

“Don’t just take what the bank gives you; it’s worth taking the hard road to find the best mortgage for you. Don’t think that you’re locked into a mortgage rate, either. It’s your biggest outlay and an area where you can save a lot of money. I reviewed my own a few years back and saved $30k over four years just by switching lenders… it’s a competitive market out there and it’s more fluid than you’d think,” he says.

Based in Auckland, Jon is MedCapital’s primary New Zealand Private Wealth Manager. He has extensive wealth management experience as a financial advisor and works with doctors through MedCapital to help them manage their finances. He told us the top questions doctors should ask themselves when taking out a new mortgage or reviewing an older one.

 

1) Does your mortgage structure complement your overall goals?

“Most people get whatever mortgage they can,” says Jon.

“But the key is to think about WHAT you want to achieve and look right across the board. For example, if you want money to do some renovations, or if you’ll be taking time off to have children, do you really want a fixed mortgage?”

There’s a variety of mortgage types and conditions out there and there’ll be one to suit your lifestyle. Thinking carefully about your mortgage in tandem with your other financial and lifestyle goals will help you plan how much you’ll need and how much you should borrow.

 

2) Is your mortgage for an investment property?

“We work with a lot of doctors who get mortgages for investment properties. But they typically go to a bank or a mortgage broker who’ll offer them the maximum lending amount and don’t give any broader advice,” says Jon.

“If you want to grow your wealth, think about what the impact of taking out $1million versus $800,000 will have on your ability to do this.”

Jon also talks about the advantages of lending from more than one provider. It can often be advantageous to consider utilising more than one lender for your properties.

“It takes a bit of work, but when it comes to investment opportunities there are a few tips and tricks where you can increase your lending but minimise your risks – splitting up your lending is one way to do that.”

 

3) Is a flexible loan right for you?

Jon says that flexible loans are good for those planning maternity leave, or for anyone who’ll need that flexibility over the short-term.

“Flexi loans can be good for some situations, for example, if you have tenants in an investment property and they leave and the property is empty for a few weeks. They’re flexible and good to help achieve short-term goals – but you pay for that and they can be quite expensive, particularly when you draw on them and take your time paying them off, if at all.”

Jon says that banks and lenders typically aren’t motivated to fix your flexi-loan (because they make more money that way), so it’s up to you (or your financial advisor) to figure out if they’re worth it, or if it is time to fix.

 

4) Did you set and forget?

A common situation we come across at MedCapital are doctors who have set and then forgotten about their mortgage rates, essentially locking themselves into a rate which could cost them thousands more in the long run.

“Busy doctors will get a letter asking if they want to fix their rates, most will say ‘yes’ and leave it at that, but you really should haggle – or go out to the market and keep your existing lender honest,” says Jon.

“Particularly in the current competitive market [January 2019], there’s good rates out there to take advantage of. Yes, it’s a pain to switch, but you can save shed loads. Look carefully at the percentage rates and don’t underestimate small percentage differences – the difference between 4.5% and 5% on a $1million mortgage is $5,000 over one year with many often fixing for longer periods.

“Remember too that you’re not necessarily locked in. In this competitive market, some lenders will cover or contribute to break fees and legal fees. There’s always a way out and though that might look expensive in the short term, you may stand to save thousands in the long run.”

 

Working with MedCapital

MedCapital is a financial management company working exclusively with doctors to proactively manage their wealth.

“We’ve got access to all the banks and all the major lenders, to find the best rate and structure for you,” says Jon.

“Each bank has its own rules that change almost weekly, so it’s worth us doing the hard yards to find you the best deal. There’s a solution there for you, it’s just about having the right conversation.”

 

MedCapital can put you on the right track, manage your investments and give you independent financial advice that’s specific to your circumstances. It starts with a no-obligation financial health check to identify your goals and opportunities. Talk to Jon or one of the MedCapital team now to find out more.

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