Mortgage Strategies for 2020
Tips & Tricks Newsletter – March 2020
It’s very hard to describe what has happened over the last few days and to know how to prepare for what is ahead. Each and every one of us will have our own individual challenges that will test us.
I read a post from Nigel Latta this afternoon that summarises the situation and offers some strategies to cope. It’s well worth a read – The importance of not losing one’s shit in stressful times:
In this Tips & Tricks newsletter, I want to hit on a few areas in relation to your finances and in particular your mortgages that may help you get through the next few months.
Mortgage interest rates are at an all-time low. If you have equity in your property and you have outstanding balances on your credit or store cards, car loans, or personal loans, now is the time to consolidate these and add them to your mortgage. The lower interest rates will help you pay these debts off quickly. Once paid off, if these repayments were then redirected to your mortgage, you will save thousands in interest cost. Better in your pocket than the banks.
The kiwi saver investment is available to withdraw in the event of Significant Financial Hardship. This can include difficulty in meeting living expenses or mortgage repayments, and also serious illness.
In regard to concerns about the decreasing value of kiwi saver investments, unless those funds are required for a first home purchase or significant hardship withdrawal, they will remain invested. When the market recovers, so will the value of your KiwiSaver investment.
In fact, if you are making regular Kiwi Saver payments, you will be purchasing more units for a lower cost. As the market recovers, and the shares, stocks, and cash investments return to normal values, the overall value of your investment will recover quickly.
Cashflow to meet Commitments
Ensure that you have enough income and savings to get through what might be tough times ahead. If incomes (and jobs) are still intact, and you have equity in your property, applying for an overdraft or revolving credit facility (before you get into difficulty) may help you get through the next few months.
If you have savings in the bank, earning very little in interest, you could also look at setting up a revolving credit or offset mortgage and sitting those savings against your mortgage which will also save in interest cost.
What is a mortgage holiday? Essentially it is when you do not need to make a mortgage repayment for up to 3 months, however, the interest cost is added onto the mortgage. Banks are not as willing as they have been in the past to issue mortgage holidays. Typically, you would need to apply directly to the bank. I am more than happy to discuss this with you first, however.
Reduction in OCR
The official cash rate is at its lowest point. The banks have mostly passed on this reduction through decreased floating interest rates. The reduction has not yet flowed through to short to medium-term fixed rates, but it may do into the future. If looking at refixing mortgages over the next few months, I am more than happy to negotiate competitive interest rates.
If Things Get Really Tough
I’m always available to have a chat, answer an email or meet for a coffee (or perhaps a virtual meeting). We can review your situation and look for a solution that may help in the short to medium term or until we return to some normality.
To schedule an initial telephone appointment please click here: Schedule A Meeting