Cutting your mortgage costs

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Save thousands of dollars and take years off your mortgage... sounds attractive, doesn't it. However, while you can be charged up to a few thousand dollars for this advice, in many cases you can find out a wealth of information for free.
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Thursday, June 10th 1999, 12:00AM

by Paul McBeth

Save thousands of dollars and take years off your mortgage... sounds attractive, doesn't it. However, while you can be charged up to a few thousand dollars for this kind of advice, in many cases you can find out a wealth of information directly from your bank or other lender just by asking.
An article in the latest Consumer says there are some easy ways that most people can cut the cost of banking (including mortgage costs) simply by reviewing the way they use their bank and sticking to their decisions about managing their money. However, says Consumer, "The banks themselves freely admit that most of their customers don't use their services as well as they should and are happy to help you sort it out".
"But you have to ask. The banks have told us they don't have the time to chase all their customers with advice. They'll wait for you to go to them."
If you're in business, there's another consideration too as chartered accounting firm Spicer & Oppenheim points out. In its June newsletter, the firm tells the tale of a client who paid a mortgage broker $3000 for advice on using their credit card and mortgage to cut down on their interest payments, ending up by rearranging their finances so they would repay their mortgage eight years earlier.
As Spicers says, that was a good result. However, the broker hadn't taken into account the structure the client was operating under and, to their detriment, they lost their ability to claim the mortgage interest as a tax deduction.
"Sometimes it is possible for people in business to structure their borrowings so that they get a tax deduction on all or part of their borrowings," Spicers says. "It is imperative you obtain professional advice before you borrow!"
So with that in mind, what are those easy ways to cut costs? Consumer suggests you start out by doing a 'stock -take' of all your banking products and then sit down (or arrange a phone interview) with someone at your local branch to work out the best combination to suit your needs while maximising interest earned and saving fees.
Specifically on mortgages, Consumer suggests that you:

shop around for loans (don't assume your own bank will be best);

beware revolving credit facilities, which it says only work if you're diligent enough with your budgeting so that your loan doesn't spiral out of control; and

Reassess your fixed rate mortgage if you're on a high rate (ask your bank what it would cost to switch to a new lower fixed rate).

Paul is a staff writer for Good Returns based in Wellington.

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