What Type of Mortgage Is Right for Me?

For the countless people that do or will have a mortgage, among the most important things you can do is to understand the difference in the various types of mortgages available to fit with your goals and financial circumstances.?

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Even if you’ve had the same type of mortgage for years, it is equally, if not more important to know and understand the differences in mortgage types as it could be costing you thousands in interest, fees, and charges – without you even knowing it!??

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Luckily, with the right knowledge and team behind you, it’s not too difficult to reduce, or eliminate, these unnecessary costs.?

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Your life, family, and income situation will likely change during the term of your mortgage, so it is important to review it regularly, and it may even be beneficial to refinance your mortgage a number of times before it is fully paid off.?

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With that in mind, let’s have a look at the common types of mortgages:??

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Standard Variable?

This is the most common type of mortgage in Australia, with around half of all borrowers opting for the simplicity and features it offers.??

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Some of the features on offer include: the ability to add additional payments, ability to split the mortgage, and even add an offset account (we’ll learn more about this later on), and more.?

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While these features are certainly great, they do often come at the cost of a slightly higher interest rate.?

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After getting into the swing of managing your mortgage, adding some flexibility can make a big difference and even save you more in interest costs, provided you use smart investment strategies.?

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Standard variable is also favored by investors and financially active families as it allows for extra repayments and redraws.?

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Basic Variable?

Usually the lowest rate option, this trades some features and benefits for an interest rate that is often around 0.6% or 0.7% lower than the standard variable rate. This is the simplest form of mortgage and is designed for those focused more so on rates and repayments, rather than any other features.?

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These are commonly used by first homebuyers and owner-occupied borrowers only looking to get a loan to get the home they want to live in.??

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An important thing for borrowers to note is to carefully check the early repayment fees, and if you’re looking to exit this loan within the first three years, the discharge fees – both can be quite steep.?

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Offset Account?

A very important feature to know about is the offset account. Simply put, it’s a savings account attached to your mortgage. The key difference? The balance in this account is mirrored and treated as if it were sitting in the mortgage account.?

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The loan balance minus the offset balance is calculated daily and charged monthly, so if you consistently have balance in the offset, you will be charged with less interest each month.?

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Offset accounts aren’t usually available with basic or fixed-rate loans, but it is always best to speak with an experienced professional as there is always a chance.?

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Package Deal??

A variation of the standard variable rate loan is what is often called an ‘All-in-one’ or ‘Advantage’ package offer. This is especially useful if you use a credit card, offset account, and a transactional account.?

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By paying an additional annual fee of around $400, you can receive a discount on your rate of up to 0.9%. Taking this into account could be what pushes it into the lead for your situation.?

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Whether you have a current mortgage or are looking to get one, speak to the friendly and experienced team here at Glass Financial.??

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Tell us about your current mortgage, or what you’re looking for, and we would be happy to advise you on the best approach and help you to make it a reality.?

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Give us a call on 1300 245 277 or send an email to [email protected]?

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