When reviewing your mortgage, it's natural to focus on interest rates. But while securing a competitive rate matters, the way your mortgage is structured can be just as important.
The right combination of lending facilities can help you manage repayments, retain flexibility and make better use of your money.
Fixed rates: certainty and control
Fixing your mortgage rate for an agreed term provides greater certainty over your interest costs during that period. It can make household budgeting easier and protect you from interest rate increases.
The downside? Fixed loans can restrict additional repayments, and early repayment or restructuring may incur costs.
Floating rates: flexibility when you need it
Floating rates generally allow you to make extra repayments whenever you choose, giving you greater control over reducing your mortgage balance. However, your interest rate can change, meaning your repayments or the amount of interest you pay may increase.
Split loans: a balance of both
You don't necessarily have to choose one or the other. Splitting your mortgage between fixed and floating portions can provide repayment certainty on part of your lending while allowing extra flexibility on the remainder.
Some borrowers also stagger their fixed-rate terms, helping avoid having their entire mortgage come up for renewal at once.
Revolving credit and offset facilities
These options can help make your money work harder.
Revolving credit: A flexible credit facility that operates similarly to an overdraft. Keeping surplus cash in the facility can reduce the amount of interest charged, but disciplined money management is essential.
Offset mortgage: Links eligible savings or transaction accounts to your mortgage for interest calculations. Your qualifying balances reduce the amount of lending on which interest is calculated, without necessarily requiring you to use your savings to repay the loan.
Availability, account rules and fees vary between lenders, so it's important to understand how each facility works before committing.
So, what's the right structure for you?
Your ideal mortgage structure depends on your income, expenses, savings, future plans and comfort with changing interest rates. A first-home buyer, a family building savings and a self-employed business owner may all have different priorities.
At Infinance, we look beyond the headline interest rate. We consider how your mortgage fits into your wider financial position and help you compare options that align with your circumstances and goals.
Your mortgage should work for you — not the other way around.
Get in touch with Infinance to review your existing mortgage or discuss the options available for your next property purchase.
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