What is Mortgage and Debt Management?
A mortgage is a security for a loan i.e. home loan, that is placed against an asset such as a property. This enables the Lender of the loan used to buy the property, to retrieve the money lent for the initial property purchase upon its sale. If the borrower has defaulted on their loan repayments to the extent that the lender believes that the loan cannot be repaid back, the Lender can also force the sale of the property.
Whilst mortgages are an essential way of financing a large proportion of the purchase price when buying a home to live in, or as a rental property investment, it expedites the way to create wealth. It also then creates a further leveraging ability to borrow against the property asset to diversify further and invest in direct equities, such as shares, Bonds or Exchange Traded Funds or another property.
Therefore, debt management is another term for assessing how your debts are, and can be structured to better improve someone’s ability to create wealth and service debt more efficiently whether it be, for example, that you may have a credit card, personal loan or a car loan, and a mortgage, and you may consider the consolidation of debts in order to reduce and streamline the loan repayments.
Debt Management is also structuring debt in an efficient manner where you can leverage off the equity that the debt is against to create further wealth whether it be as a deposit to buy an investment property or to invest in equities all with the ability to create a tax deductible expense against earnings from such investments which may end up being negatively geared or positively geared.
Our Mortgage and Debt Management specialist provide debt consolidation strategies with the ability to help save money and potentially create future wealth.
Why do I need this?
If you currently have a debt, you need to ensure that your structure is appropriate for you and you are deriving the maximum efficiencies from your structure, whilst at the same time saving on costs and having the ability to create further wealth if and when you are ready to do that.
If you do not have any debt at the moment, you may need a properly structured strategy plan, in order to create wealth such as, purchasing your first residential home which may be a house, or an apartment, depending on your level of affordability , whether single, married or partners with or without children, and your lifestyle needs .
What happens if I don’t have it?
If you don’t have debt, the positive is that you haven’t got a financial commitment to anyone! However, the negative is that you haven’t committed to buying a growth asset and therefore, are most likely going nowhere when it comes to creating wealth. These days and if you look at history, the only way people can advance and improve their financial well being is to incur debt whether it be to purchase their first home to live in, to buy an investment property or to buy a business or create a business, or invest in Equities, Bonds ETFs etc.
Without debt, an individual’s capacity to achieve these things is very difficult (and much slower to accumulate a reasonable asset base) simply because they haven’t got the capacity to save for example $500,000 or $1M within a short period of time, of 2, 5, 6 years. However, they possibly can, without any short term debt, save enough for a deposit on a home that costs in, for example that price range. Hence, the need to borrow and leverage for your future.
If you don’t you will not have debt, but at the same time you will most likely not have sufficient wealth for your potential future needs. It is extremely important to create an appropriate balance of debt and wealth that you are comfortable with in servicing and investing in.
What will the cost be to me?
Initially the “cost”, is the cost of committing yourself to the potential of creating wealth, and for some, a fearful exposure to debt, whether it be large or small, and a fearful exposure to the fact that you now have a commitment to a lender to repay that debt, and a fearful exposure to the fact that you’re decision to buy an asset/s with such debt that may not work (due to debt serviceability) or increase in value.
The question that you need to ask yourself is what “is the alternative?” and “what happens if I don’t make such a commitment?”
To me, the intangible costs, which are ultimately your true current and future lifestyle costs, is far greater if you do not participate in an appropriate debt / wealth creation strategy, than if you do.
We at FOFM can help you with this by discussing with you what you would like to do and we the available options that you could take up in order for you to achieve your objective.
We can further help you through our debt specialists who can arrange an appropriate debt structure for you in a manner that will be cost and tax efficient and create wealth.