When it comes to mortgages, most people want to get rid of them as quickly as possible. However, navigating the complex world of home loans and finding the right strategies can be challenging. But with a little help and the right advice, you could restructure your home loan with better interest rates or a shorter loan term which could result in huge savings over the life of your mortgage.
Aseem Agarwal, Head of Mortgages at Global Finance in Auckland explains, “Through loan restructuring, homeowners can make additional payments towards their principal or opt for shorter loan tenures. These strategies accelerate the equity-building process, enabling borrowers to build a valuable asset that can support their long-term financial goals.”
So, let’s look at the benefits of loan restructuring and how doing it well can mean financial freedom sooner.
The benefits of loan restructuring
Restructuring your home loan is all about finding ways to pay off your mortgage more quickly than the standard 30-year term offered by the banks. It is a proactive approach that puts you in charge of your financial well-being.
By keeping on top of your mortgage, rather than leaving it in ‘set-and-forget’ mode, you can work to find the correct combination of fixed and floating interest rates and select the right terms for the fixed portion of the loan thereby saving loads of money in interest repayments.
Empowering homeowners
Loan restructuring can give you a sense of control. By adjusting the terms and conditions of the loan, you can have greater financial flexibility, enabling you to better manage times those financially tricky times and get to where you want to go faster.
As Aseem says, “Loan restructuring empowers homeowners by tailoring their mortgage to suit their financial situation. It allows borrowers to regain control over their repayments and adapt to changing circumstances, such as interest rate changes, job loss or unexpected expenses.”
Opportunity for lower interest rates
You can take advantage of prevailing market conditions by refinancing your mortgage or negotiating a lower rate with your lender. This can be especially beneficial for homeowners who took out their mortgages when interest rates were higher.
Leverage the power of fixed and floating rates
This strategic approach allows you to take advantage of favourable interest rates. Fixed rates provide security by locking in an interest rate for a specific period, shielding you from potential rate hikes. Whereas floating rates offer flexibility and the chance to take advantage of potential interest rate drops.
By finding the right balance between fixed and floating rates, Global Finance can help you optimise your mortgage structure. “By carefully analysing your financial situation and market conditions, we determine the ideal split between fixed and floating rates. This approach offers stability and flexibility, ensuring you can effectively manage your mortgage repayments while working towards early mortgage repayment,” explains Aseem.
Reduced monthly payments
If you need to free up funds for other essential expenses, loan restructuring can mean reduced monthly mortgage payments. This can be done by extending the loan term, adjusting the interest rate, or modifying the repayment schedule. As Aseem points out, “Restructuring can alleviate financial stress and improve borrowers’ overall cash flow.”
Improved debt management
Use your mortgage for debt consolidation. You can restructure your mortgage to include credit card debt and personal loans. By incorporating these debts into a single payment, you can simplify your financial management, as well as potentially benefit from lower interest rates associated with mortgages.
Leveraging equity
Another significant advantage of loan restructuring is the ability to leverage equity. Home equity is the difference between how much your home is worth in today’s market and how much you owe on your mortgage. As you make mortgage payments, your mortgage principal reduces, and you build home equity. “By restructuring their loan, homeowners can unlock the potential of their equity”. You can tap into accumulated equity to access additional funds for things such as home improvements, debt consolidation, or investing in other ventures.
If you bought your home with less than a 20% deposit, for example, and you’ve built up equity in your home, you may be able to use that equity to negotiate a new mortgage. With a smaller deposit, you may well have been paying above-market rates for your home loan. Now, your home may be worth more than when you bought it. Therefore, your equity in your home will also have increased, making you eligible for more favourable mortgage terms.
Loan restructuring offers numerous benefits for homeowners
It is a valuable tool that can help homeowners be adaptable. Restructuring your home loan can help you regain control over your mortgage obligations, improve cash flow management and leverage equity.
As mortgage advisors at Global Finance, we understand the importance of personalised solutions. For restructuring to work for you, a number of factors need to be carefully considered. Here are the main ones we take into account under our Mortgage Genius Plan:
- Assessment of income, expenses, and potential savings: This analysis helps identify areas where savings can be maximised and potentially allocated towards mortgage repayments.
- Consideration of current and projected interest rates: Interest rates are a critical aspect of any mortgage. Using our expertise and leveraging our relationships with lenders we hunt out the most competitive rates available.
- Splitting of the loan into portions: We would advise on the optimal allocation of your mortgage between fixed and floating interest rates.
- Evaluation of anticipated financial commitments: Understanding your near future financial commitments, such as upcoming expenses, potential income changes, or other financial obligations that may impact your ability to meet your mortgage repayments comfortably is crucial.
A customised restructuring plan
“With our Mortgage Genius Plan, we aim to empower homeowners with the tools and expertise needed to pay off their mortgages faster. By combining our knowledge, experience, and personalised approach, we are committed to helping you achieve financial freedom.” – Aseem Agarwal, Head of Mortgages at Global Finance.
If you are a homeowner seeking to optimise your mortgage, then reach out to our team of experts. Together, we can explore your options and help you take charge of your financial journey.
The information and articles presented in this blog are meant for knowledge and information sharing purposes only. They do not constitute personalized financial advice. We strongly advise you to seek tailored financial advice based on your specific needs, goals, and circumstances before making any financial decisions.