If you want to invest in stocks and shares, you will seek a financial advisor to discuss your goals. They will then come back to you with a financial plan that outlines where you should put your money and what moves you can make to maximize profits and secure your financial plans for the future. When you see a mortgage broker, they can provide a similar service, but with a mortgage plan. Both roles should do their own version of a KYC (know your client), do due diligence and should be prudent in guiding you down the right path towards your overall goal.
Although a mortgage broker does not use methods like the Monte Carlo theory to model the probability of certain outcomes, they will still assess the mortgage market and present you with different options to help you make more sensible financial decisions. From buying down your rate, accepting a higher rate with less costs or choosing the par rate. You should know what your break-even is when you choose your rate, such as how many years before it will pay off to buy down your rate. You may ask yourself, if I plan on living in this house for only 3-5 years, maybe there is a better strategy to potentially save money, vs staying the whole term of your loan.
What Does Mortgage Planning Involve?
When you start mortgage planning, a broker will take into account your income and expenditure. They may even ask you to provide bank statements and other documents so they can get a clear picture of your finances. They will also need to know what you want from your mortgage plan, such as whether it is about reducing monthly repayments or increasing equity in your home.
Once they have all this information, they can provide you with different options that could work well for you and allow you to achieve your financial goals. Mortgage brokers who offer this service should be able to show how each option benefits buyers along with the associated risks and costs of each one.
During the process, you will be given information about all of the costs involved, the value of your home, and how you can adjust those costs. For example, you can use mortgage planning tools such as the mortgage calculator to find ways to manage your desired mortgage payment, which includes home insurance costs, taxes, and it allows you to control the estimated interest rate(s) so you can see if you could afford to pay higher monthly installments over a shorter term period.
In much the same way that you would make financial decisions about investments based on analysis from a financial advisor, you can use the information that mortgage brokers give you to make decisions about the future. By choosing between adjustable and fixed rate mortgages and selecting the term of the mortgage, you can manage your monthly payments and determine when you will be able to pay off the mortgage.
A broker can also help with pre-qualification of mortgage products, so you have a clear idea of what you will be able to borrow and what terms are available to you. By working with professional mortgage financial services, you can make informed decisions about financial instruments.
What Are The Benefits Of Mortgage Planning?
Going through mortgage planning can help you avoid paying unnecessary fees and charges that arise when you take out a mortgage. This means that by the time your repayment term ends, you should have paid off most, if not all of your initial loan.
You might also be able to decrease the chances of mortgage insurance costs earlier, rather than letting it run its course, meaning that could potentially save money by being diligent and following the mortgage servicers instructions on how to potentially remove any mortgage insurance early. Results are not guaranteed, but at least you might get a few helpful hints on different strategies that could potentially save you thousands of dollars over the long run.
Another benefit is being able to put an immediate plan in place so that when it comes time to repay your loan, there are no nasty surprises waiting for you at the end of the deal. You know exactly how much money has to go towards each repayment, how long it will last for, and what happens if things change. You can also learn different strategies such as making an extra mortgage payment every year, as this could potentially allow you to pay off your mortgage faster than expected.
A mortgage broker can help you to get a better deal when taking out your loan than going to a bank. Working with professionals means you will be able to have lenders compete for your business which hopefully could lead to reduced fees, find the best rates possible, and secure lower monthly repayments so that you have more money to spend elsewhere. Ultimately, this allows you to make better long-term financial plans when taking out a mortgage.
This is a big benefit when planning for retirement. Later in life, you can look into options for refinancing your property and releasing equity in your home, which might be able to be used to boost your retirement funds, such as investing in a rental property that could potentially pay a decent income.
Whether you are taking out a mortgage for a new property or you want to look into different ways to reduce monthly payments, find a more favorable interest rate, or remortgage your property, mortgage planning services are the best way to go. A professional mortgage broker will be able to take you through all of your different options, just like a financial advisor would, and help you find the best financial instruments to achieve your overall long-term financial goals.
Get in touch today to learn more about how we could help you make better decisions about your mortgage, as we are ‘the first step to a pre-approval’.