Most people when they take a mortgage, give up control. This somewhat makes sense, you are borrowing a large amount of money from a bank or lending institution and do have to follow their rules, to an extent.

Let’s have a look at what you don’t really have control over:

• The minimum repayment : be it weekly, fortnightly or monthly you have to pay this or risk the lender selling your house.
• The interest rate: while you may get a selection of interest rates they are determined by the lender. There may be a slight room for negotiation but in the end it is only a choice of options presented to you.
• The bank’s hold on your house: While you are borrowing money your house has the lender registered as having an interest in the property
• The amount borrowed: this is set at the time

With so much in your bank’s control it is easy to accept and just make the mortgage payments as scheduled. However in doing this you will forgo what you are able to control:

• The interest cost. This can be reduced, at no cost to yourself, with the right loan structure. Up to two thirds of your total mortgage payments can be interest. Small changes, especially early on can end up saving you thousands if not hundreds of thousands in interest.
• Extra repayments. With the right loan structure you will be able to pay above the minimum repayment, a few extra dollars a week will save you tens of thousands in interest plus take years off your home loan.
• The length of your mortgage – Most people will get a mortgage with a 25 or 30 year term and if you stick to the minimum repayments this will be how long you have the mortgage for. However by reducing the interest cost and making extra repayments you will automatic start reducing how long you will have the mortgage for.

Having some control over your mortgage has huge financial implications. Next week I’ll show an example to illustrate.