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Empower Wealth Blog post by Empower Wealth

$13,000 saving on loan set up costs!

At Empower Wealth we believe that making sure you have the right finance structure is paramount to the success you will achieve in your wealth building journey. In this newsletter I would like to share a story of how we were able to save a client $13,000 in loan set up costs, by ensuring that they had their loans structured in a way that was cost effective as well as flexible.

Bill and Mary (names changed for privacy reasons) made an appointment to discuss their lending options after they had purchased a new owner occupied home.  The couple had an existing investment property and after the successful negotiation of the new purchase went to see their in branch lender who had organised the original loan on the investment property.

The couple needed funds to pay the deposit and the branch lender suggested that they take the funds from the equity in their investment property and also set up the loan for the new purchase and the best way to do this was to cross-securitise their properties.  As the couple did not have a huge cash reserve they needed to borrow an amount that would push them to a Loan to Valuation Ratio that would mean they would need to pay Mortgage Insurance.  The quote they received for the insurance was in the order of $27,000.  The reason this was such a significant amount was because of the properties being cross securitised, which meant the bank was going to charge the insurance on the entire loan amount.

The clients sought a second opinion from Empower Wealth and the discussion centred on structuring the loans in a way that would reduce the amount of mortgage insurance that they needed to pay.  By keeping the properties as standalone securities we were able to decrease the Loan to Value Ratio across each of the properties in such as way as to decrease the amount of Mortgage Insurance that was payable by the clients to $14,000.  Our finance restructuring kept the investment and owner occupied debt separate, which was important for tax deduction reasons also.  The structure also allowed for future flexibility of the couple’s portfolio to enable them to continue on their investing journey, so further anticipated savings can be enjoyed.

In addition, because we have a panel of over 30 lenders offering us a choice of hundreds of lending products for our clients, we were also able to beat the interest rate offered by their existing lender and we got a cheaper and more flexible deal for these clients that wasn’t available from their existing lender, again saving them even more over the longer term on their loan – which translates to more savings for them and a chance to utilise this improved cash flow to grow their wealth even more.

This is a great example of why careful consideration of your finance structure is a very important part of the finance process.  You could be losing thousands of dollars in fees and charges that could be avoided because you don’t understand or you didn’t know about alternative loan structuring options that banks fail to tell their customers about.

Seeking advice from professionals who are specialists in this area will give you finance options that are in your best interests for now and into the future.  At Empower Wealth our sole job is to work for our customers, not any lender.  Staff working for banks will always tell you they can offer you more, but with only a couple of lending offers and limited skills in sophisticated loan structuring, due to limited knowledge and experience…..well this is just another example of us proving its best to get someone working with your best interest in mind as opposed to bank staff being loyal to their Bank instead of you.

 

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