Are you getting the best value from your mortgage? If you don't know the answer to that question, then it's time to reassess your mortgage structure, pronto.
If you haven't health-checked your mortgage in the last three years, there’s a good chance that your loan may not fit with your current lifestyle – especially if your circumstances have changed, but your loan hasn’t.
As a result, you could be wasting thousands of dollars without even realising it.
As a borrower, it’s easy to fall into the trap of getting a home loan and placing it in the “set and forget” file. But according to Brisbane property consulting and finance broking firm, Grow Consulting Group, it’s vital that you regularly assess your mortgage structure to ensure that it meets both your current and future needs.
“By asking yourself some questions [about your loan], you’ll determine whether you need to make some changes to your investment and financial situation to help you achieve your goals and create choices for your future,” says Ayda Shabanzadeh, managing director of Grow.
Shabanzadeh believes there are four key reasons why you should assess your home loan structure to make sure your money and your mortgage is working for you:
- Employment situation
Did your or your partner’s employment situation or net income change during the course of 2010? “Your lifestyle may be suffering due to reduced affordability if your income has dropped – or [if it’s increased], you may be able to make higher repayments that will ultimately work to your advantage by decreasing interest payments,” she says. Either way, it makes sense to take stock of your overall financial situation. As the golden rule goes, your mortgage should account for roughly one-third of your household income.
- Changes to personal circumstances
Has your lifestyle or personal circumstances changed? For example, are you recently single or newly partnered? Have you recently had a baby, or taken out a personal loan for a car? “If so, you may need to consider whether your lifestyle and affordability is being compromised,” Shabanzadeh says.
- Investment goals
If you have an investment property, it’s a good idea to compare your goals for the property with the actual results achieved in the last twelve months. For instance, did your investment property achieve the negative gearing strategy you wanted? Are you getting the maximum tax offsets from the property you own? Has your property actually become positively geared? Does it make sense to make any changes, such as fixing your loan?
- Future needs
Finally, you need to be sure that the structure of your mortgage is meeting your current and future needs. Consider whether your loan is set up in such a way that it minimises the interest you are liable to pay, and it helps you reach your financial goals. “If you’re not sure, it may pay dividends to sit down with a qualified mortgage consultant to see whether other options will service you better,” Shabanzadeh says.