Advice about advice!

Hi Everyone

Okay, so talking to my brother seemed like a good idea at the time. I'll take it from you guys that its not.

Some of the comments below reckon that a financial planner is a good idea, some say a waste of money, and that we should check out the free budgeting services. I guess there are more than just the two options (brother or planner) to consider on this one. Everyone does seem to agree that doing a proper budget and a getting control of the mortgage are our two biggest/best things to do.

Anyway, I mentioned we had Martin Hawes looking at what we're doing - not as our financial planner, but as a financial expert who can help explain some of the issues. This is what he's said so far:

Steph,

Brothers-in-law (along with cousins, kindly uncles and the likes) have cost more people more money than just about anything that I know. You need advice – good advice.

Your main issue is your $211,000 mortgage. If it is a standard mortgage repaid fortnightly over 25 years at 9.5%, you will end up paying $435,810.25 for your house. That’s the same again in interest payments!

There is a great deal that you can do to make the mortgage more efficient and so reduce that interest cost. You need to start up “Project Mortgage” – open a file and set out to save as much as you can of that cost.

The first thing that you should do is learn all about mortgages – how they work, the products that are available and the different interest rates from different providers. Go to the library or search the web (I know www.sorted.org.nz has plenty of information) and play with some online calculators to see the difference that even an apparently small interest rate reduction can make.

Concentrate on two things: first getting the lowest interest rate possible. You can do this by using fixed rate mortgages which have mostly been much cheaper than the variable rate ones. The bulk of your mortgage should be on a fixed rate. You may also have a revolving credit facility (you will need to be disciplined!) which Matt’s salary is paid into (along with any other money that you have – savings or work bonuses), and which you pay the bills out of. The idea of this is to keep total indebtedness as low as possible. Consider also switching to a lower cost provider although be sure that they offer the products and services that you need – e.g. a full range of fixed rates and revolving credit facilities.

Second, make sure that you are putting as much into the mortgage as you possibly can. Lenders calculate interest daily and every day that you have their money, you pay.

While you are up-skilling yourself on mortgages you should also see some professional advisers:

1. Financial planners can help. Go and see a selection on a no obligation basis and see if you can spend an hour or two with one to help with the mortgage. It might cost you a few hundred dollars – but the savings will be far greater than this.

2. Mortgages brokers can help. They will want you to switch to a different lender, but if they can show you how that will save you money the hassle will be worth it.

3. Your bank might be able to help – especially if it knows you are considering switching.

Steph, you and Matt have a lot going for you with all that income. Get some proper advice – it does not have to cost much; it may not cost anything at all. And anyway as an old friend of mine once said: if you think that dealing with a professional is expensive, you wait till you deal with an amateur.

Regards, Martin

At this stage I'm not ready to commit the $$$ to going to a planner, we might, but some people have given us really detailed comments below, so we're going to run with those and see where it takes us.

Thx TM MB!

PS. Working on our budget now, there's a lot to go through but its well worth it. Link soon!