Creating a borrowing strategy is an intelligent way to approach your mortgage when purchasing a home in order to help you climb the property ladder. It’s a crucial piece of the home buying process and one you shouldn’t skip over too quickly.
Finding the best deal in the market is a challenging task when various lenders offer so many choices.
Having sold many homes over the years, we find that the most successful and trouble free purchases are completed by buyers on top of their financial position.
Here are a few observations to help you organize your borrowing strategy.
Not All Lenders Are the Same
Different banks offer different loans. No lender has the same risk profile as the others. So, don’t be surprised when you get a variety of responses when you approach them for a loan.
Low Isn’t Always The Way to Go
The lowest interest rates often come with the most inflexible loans. Be careful not to trap yourself in an arrangement that costs you more in closing costs than the cash you save on a low interest rate.
Flexibility is essential in a mortgage because your circumstances are highly likely to change over the years. For example, you may want a loan that will allow you to pause payments during ill health or time when you have kids.
While the terms “creative accounting” can sound like your working for a mob boss, it’s doesn’t have to be a bad thing. Knowing how to take advantage of the systems in place can help you leverage your money and maximize the use of other people’s money (the bank’s). Many lenders also have a strong background in accounting and can help you understand things like the tax implications on a purchase…and sometimes there’s a better way.
When your rates are fixed, then the cost of your borrowing is stable. Your mortgage repayments will be consistent. Many borrowers ask the bank for a fixed rate when rates are low.
The difference with fixed rates is that your payments can go even lower if the cost of borrowing falls further. That’s a win for you. But all coins have two sides: rates can go up, and that is likely to hit your cash flow.