Mortgage Reduction Strategies - Why most don't work and yours will.
What is a mortgage reduction strategy and why do we not believe they can work? What is a mortgage reduction strategy? A Mortgage Reduction strategy is a systematic approach to reducing one’s debt as quickly and efficiently as possible, therefore reducing the amount of interest paid over the life of a loan. Usually termed interest minimization strategies. Most of you will remember the early introduction of The Line of Credit loan. The miracle loan that will save you thousands of dollars and years off your loan. These products were introduced to un-suspecting clients with little or no training or ongoing support. Generally these products where sold under the guise of an interest minimization strategy. With borrowers rapidly sinking and the negative media hype surrounding the problem, the public has since been weary of any interest minimisation strategy good or bad. Since then most people associate interest minimisation with a Line of Credit and the spiraling loss of control that comes with it. Fortunately that was back then and now we have an industry code of practice and improved finance products to genuinely assist clients to achieve their goals. A good interest minimisation strategy is a combination of three major factors.
The Product – A good strategy requires a product that allows you to keep as much money as possible against the mortgage for as long as possible at the lowest possible cost. Put simply there is no point having a loan that costs you $50 per transaction and having all your savings in the loan. An effective mortgage reduction product will allow you to redraw your savings from your loan or offset account at little or no cost whenever you need it. The reduced costs will encourage you to work with the strategy and achieving your goals. You no longer need a Line of Credit to receive the advantages a LOC provides. There are a number of mortgages on the market that are considered transactional loans and provide the benefits of a LOC with the discipline and comfort of a reducing credit limit like that of a traditional principle and interest loan. The Strategy and Education – You should only consider a finance industry compliant strategy that can be easily described prior to purchase, have a system of monitoring and management, and be reviewed at least quarterly by your finance professional. An effective strategy will provide you with the tools and knowledge required to help you make informed decisions so you can best decide when and where to spend and save your money. Ongoing care and communication from your finance professional will help you stay on track. You, the Strategy Owner – By far the most important aspect of any interest minimisation strategy. You need to be committed to making it work. The product on it’s own doesn’t work, the tools are nice but won’t work without you and you alone will have difficulty keeping on track without the other two.You and your financial lifestyle will determine which product to select and how extensively you use the tools. Having a clear set of goals and a desire to reduce your overall interest payments is vital to your success. Does this mean I have to penny pinch each month? Absolutely not, if you are not enjoying life and reducing your mortgage you will not do it, however if you are maintaining a suitable lifestyle and have a clear strategy in place you can do both. In summary, consider the three major factors when considering your effective mortgage reduction strategy, know your products, look for an industry compliant system and set yourself clear, realistic and achievable goals. Interested and would like some help designing your interest minimization strategy, read more on our Lifestyle Strategy page or give me a call on 1300 854 335 to discuss. P.S The sooner you get started the quicker you will finish
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