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Economists’ top tips for getting the best mortgage deal

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In a recent episode of The Smart Property Investment Show, Dr Diaswati ‘Asti’ Mardiasmo, Chief Economist at PRD Real Estate, shared her own mortgage refinancing journey.

Mardiasmo, who paid off her COVID-19-era fixed-rate mortgage in April, got a nasty shock: mortgage rates were set to jump 4 percentage points.

“I did the math and I was like, ‘Oh my gosh, where am I going to get the other $900?'”

“We know it’s coming, but going from 2.1 percent to 6.1 percent is still a shock.”

Although earning an extra $900 a month was hard, Mardiasmo knew he was one of the lucky ones.

“The mortgage on my property is pretty low, under $300,000,” she says. “If I had a mortgage of $500,000 or $600,000, I’d have to come up with closer to $2,000 for my next payment.”

In the end, through careful strategies, the chief economist was able to reduce his extra mortgage payment to just $400 a month, saving him $500.

Here are some tips to help you maximize your savings when refinancing your mortgage.

1. Avoid Distractions

The mortgage refinancing process can be a daunting task, and the plethora of online ads can confuse even the most experienced mortgage hunter.

“I’m the chief economist in this field, and it was a bit of a danger zone even for me,” Mardiasmo confessed.

“The first thing I did, and I don’t recommend anyone do, is Google ‘low interest rate refinance.'”

As soon as she did so, Mardiasmo was immediately bombarded with publicity.

“I Googled it and Facebook, Instagram and all my social media feeds were filled with ads from mortgage brokers, banks and other lenders saying, ‘We can give you low rates.'”

Mardiasmo recommended speaking directly to a qualified mortgage broker rather than succumbing to the confusion of online offers.

2. Work with multiple mortgage brokers

A lot of money depends on your choice of mortgage lender, so it’s essential to have as much information as possible.

“Because I’m a researcher, I didn’t just go to one mortgage broker, I went to three mortgage brokers,” Mardiasmo said.

Taking advice from three mortgage brokers allowed the chief economist to consider a wider range of options and cross-analyse the results to come up with a common recommendation.

3. Create a cheat sheet

To get the most out of your mortgage broker, Mardiasmo recommends creating a “cheat sheet” of all your important financial details.

When on the phone with a mortgage broker, she advises would-be refinancers to keep a cheat sheet nearby so key information can be relayed quickly.

Information to include in your cheat sheet includes your current loan amount, loan percentage, number of years remaining, assets, liabilities, credit cards, etc.

“Apparently, I knew the numbers and was the ideal customer,” Mardiasmo said.

4. Compare the results

After speaking with the three mortgage brokers, the chief economist expected to come away with a common product, but instead received nine different proposals, three from each mortgage broker.

“So then I had to think, ‘Okay, how do I narrow it down from nine to one?’

To make this decision, Mardiasmo created a spreadsheet that included all the variables, including interest rates, cash-back offers, mortgage offsets, costs of terminating contracts with current mortgage holders, legal paperwork, annual fees and registration fees.

5. Convert it into cash

Rather than just including offers and percentages, Mardiasmo made sure to translate all of the terms into actual cash.

“It’s about figuring out what’s important to you and really doing the math,” she said.

“For example, say you have a product with a 6 percent variable interest rate and no cash back, and a product with a 6.15 percent variable interest rate and $4,000 cash back. What does this difference in interest rate fluctuation actually mean in dollar terms?”

You’ll have to sit down and use a calculator for a few hours. Mardiasmo stressed that it’s well worth taking the time to do the math.

6. Add future features

Refinancing your home loan is also the perfect time to consider streamlining any other personal loans you may have down the line.

In Mardiasmo’s case, refinancing his mortgage was the perfect opportunity to borrow a bit more to cover future expenses.

“My current car was reaching the end of its life, and I wanted a new one,” she says. “I figured a new car would cost a few thousand dollars more, so I added that to my mortgage to get one interest rate instead of two loans and paying extra.”

Upcoming vacations, credit card debt and other expenses may also be added to your mortgage.

7. Repetition

“These days, refinancing is not a once-in-a-decade thing, or even once every two or three years,” the chief economist said.

“It can be intimidating because you don’t know the types of products and how to handle all of them,” she said, acknowledging that making a mortgage decision takes a lot of time and effort.

But if you stay vigilant and do your research, you could end up saving hundreds of dollars each month.

“When you break it down into actual dollars, it starts to make sense,” she said.

You can listen to our full conversation with Mardiasmo here.

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