Nov 30

A mortgage broker is worth his weight in gold

Published in new car financemortgage brokerhome finance by Vicky Edema
A mortgage broker is worth his weight in gold I recently decided to refinance my home loan and my investment loan and it was suggested to me that there was little need for a mortgage broker because it was easier enough to go direct to a bank and apply for a loan. I thought that I would speak with my own bank. The first frustration was I could not actually contact my branch direct. I had to phone a 1300 number which was a call centre operation outside of Australia. No one could assist me immediately – rather I had to wait on a return call. This was not convenient but I still left my number.

I decided at the same time to call a mortgage broker to whom I had been referred. The mortgage broker was available when I called and I was able to immediately discuss my mortgage requirements. I was keen to obtain a home and investment loan and had initially thought that I would simply take out one mortgage for this. The mortgage broker knew his stuff. He advised that I should speak with my accountant first but that it would be more tax efficient if I was to split the home loan and investment loan because if I proceeded with a “mixed loan” then any additional repayments I made would have to be applied on a pro rata basis – that is I would have to apply some of the principal repayment to my home loan and some to my investment loan. The mortgage broker pointed out that this meant I would not be repaying my non-deductible home loan debt as fast as I might otherwise be able to do. The mortgage broker asked me whether I would need a redraw facility and explained the benefits of this to me. The mortgage broker also discussed my future plans – would I be looking to invest further in the future, did I have plans to sell at any stage soon – all of these questions impacted on decisions regarding fixing or leaving my mortgage on a variable rate.

Another benefit the mortgage broker alerted me to was the advantage of having a capitalising investment line of credit in that should there be any shortfall between my investment income and outgoings then I could look to capitalise this shortfall rather than meeting this shortfall from my personal income. The mortgage broker suggested that again it would be more tax efficient to capitalise these shortfall investment costs and apply the resulting surplus personal income to additional repayments on my home loan. The mortgage broker showed how much quicker I could repay my home loan if I was able to apply just an additional $200 per month repayment to it. It was quite amazing. Furthermore the mortgage broker advised that I should speak with my accountant because there had been recent private rulings from the ATO and a draft tax determination on the horizon concerning the deductibility of capitalised interest. The mortgage broker gave me a reference for the private ruling on the ATO website and sure enough a taxpayer was able to claim the capitalised interest on an investment line of credit where he had capitalised the investment shortfall and applied extra repayments to his home loan. This made a significant difference to the taxpayer. Had it not been for the mortgage broker I would not have been aware of the advantages of ensuring that my home and investment loans were split and that by including a capitalising line of credit in my loan package I would be able to repay my home loan so much faster.

I decided to proceed with the mortgage broker. By utilising the mortgage broker I not only achieved a better loan structure but the interest rate I ultimately settled on was less than that offer by the bank’s mobile lender when he eventually called me back.
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