“Hey John and Mary, awesome catching up again this morning thanks for your time!
Once again just to confirm and summarise what we discussed…
– $50,000 Revolving Credit
– $850,000 Fixed for 12m @2.50%
Revolving Credit Explained
Remember this revolving credit (R.C) will now be your ‘everyday’ account as well as your ‘savings account.
Remember as you have some savings left over after settlement please ensure this is put into your R.C. Effectively your $15,000 savings has reduced your mortgage (the amount charged in interest) by this same amount. Far better return than having this in Term Deposit earning 1.00%
How it works
With R.C you only get charged interest based on what you actually owe on any given day. You can redraw your money back up to the credit limit just like a regular overdraft.
We’ve identified after doing your mortgage and your personalised budget, that you will still have a decent surplus of $500 per week. This is after us saving you $50 on those insurances.
This means all going well you’ll have paid down an additional $26,000 as a minimum over the next 12 months. This is your ‘available credit’ for you to use and spend as needed – if things don’t go to plan. The beauty is you can far more confidently pay this down at such an aggressive rate as you have access to this money if things don’t go so well.
Otherwise, essentially this is principal or capital you’ve paid off of your Home loan over and above the principal payments coming out of your fixed mortgage.
In 12 months’ time we review and if we have reached a healthy surplus we can take a chunk off the one-year fixed loan account and pay that down. Yes, we are now spending or using some of the funds in the Revolving Credit. to pay down your loan.. then your owing balance in the revolving credit increases (as you’ve use that money) and then your aim is to pay down the owing balance in year 2.
Year 3 wash rinse and repeat.
Based on these numbers John & Mary you’ll be on track to pay your mortgage off within 17 Years savings about $174,000 in interest. If rates increase the benefit and savings you’ll make by implementing this system will be far greater.
Enjoy you new home and thank you for those referrals
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Great advice usually has a cost, but our expertise is free to first home buyers because the bank pays us! Banks pay us a commission because we are essentially doing all of the hard work for them. Most importantly we are strictly ‘unaligned’ which means we are not obligated to do business with one particular bank over any other, which means you’re always getting the best options and advice based on which bank is best for you.