My mission as a mortgage broker is to build a firm understanding of my client’s needs and objectives in order to fit them with the best product. And yes, attaining the most competitive interest rate is important.
Through years of experience, through many in-depth conversations I have learned, what is of most value to my clients is the support and guidance on how to best structure their banking. Simple suggestions on how they can improve their situation through structure or choice of products can work wonders. For example;
Scenario, a couple may prefer to hold separate accounts for personal salaries, expenses and savings, from which they contribute their share of the mortgage.
Problem, ordinarily the separate accounts would earn interest at the deposit rate, which is always less than the mortgage rate.
Solution, I would suggest utilising a lender that offers multiple offset accounts, which allows the clients to continue the current structure while the balances offset the mortgage rate. The savings over the life of the loan, through correct product choice can be substantial!
Scenario, over time I’ve seen situations where clients have numerous accounts setup with the one bank. The accounts include a holiday fund, a house fund and another for expenses to assist with making the savings goals a reality.
Problem, the client now owns a property, holds a mortgage and has maintained the same structure, despite a changed financial situation!
Solution, in this situation the money from various account can be used more efficiently to offset interest on the home loan (not to mention fees!). Simplifying a clients banking through reduction in accounts can decreases expenses and allow the home loan to be paid down quicker!
The above scenarios both involve offset accounts, are they a must have? This depends on the fees charged & if there are multiple offset accounts, but more importantly if an offset account best suits your needs. Through getting to know clients, I’ve found some prefer to keep their funds in redraw.
Why? Behaviourally, the extra step of tapping the redraw makes them less likely to see the money and splurge on impulsive purchases as a pose to keeping their funds in an offset account, which is just a savings account after all.
There are other options where the larger income may cover all expenses in one account. Then the partner’s income goes into the offset account which covers the home loan repayment and surplus funds sit there to build up the offset account. If the offset account is not suited, there are plenty of lenders where you can salary credit straight into the home loan which covers the home loan repayment, and the surplus funds then sit in the redraw.
With a multitude of lender all offering similar product offerings with subtle variance, the difference can often lie in how your banking is structured to best suit not only your financial, but your behavioural situation to ensure your money is working best for you!