Auckland, New Zealand -- (SBWIRE) -- 07/18/2014 -- It would seem that in a perfect world, mortgages wouldn't be needed in order to buy homes. In reality, it can actually make sense to finance a house even for those who could afford to pay cash. This is because sinking that much money into a house or building means that the money can't be used for other things - things that could actually be more profitable even when the mortgage interest is taken into account.
"Many people don't realize that it can actually be a good idea to get a mortgage," said John Bolton of Squirrel Mortgage, which can be found at http://www.squirrel.co.nz/. "But for someone with excellent credit, it's often possible to make money by doing so. A mortgage frees up cash or equity to be invested in things that can pay off far more than the interest rate of the mortgage will cost."
Of course, such actions should only be taken after very careful consideration. A house shouldn't be mortgaged to make a risky investment or start a new business. News reports of people losing their homes this way abound. "It's true that people can become overly excited and mortgage a home when they really shouldn't," Bolton agreed. "Such action is best reserved for things like expanding an already-thriving business or making other comparatively safe investments."
For those who aren't interested in investing or who don't have the credit rating necessary to make it work, it may seem like the best thing to do is pay off the mortgage as soon as possible. While this is the best course of action on paper, many people in these categories don't have a big pile of money sitting around waiting to make it happen. In these cases, refinancing is worth consideration.
"As the mortgage market changes, it can become possible to get lower interest rates than were originally agreed to. In these cases, it's often worth it to refinance to take advantage of the better terms that are now available," Bolton explained. "Sometimes, it can seem like it's not worth it to bother because the difference seems small. In reality, a small difference amounts to several thousand dollars over the lifetime of a loan. Therefore, it's worth it as long as the savings exceed the closing costs and other charges associated with refinancing. It usually doesn't take much of a difference to gain this benefit when the costs and savings are calculated over the entire term of the mortgage."
One area that many people don't think of when considering mortgages is that mortgages themselves are investment instruments. Companies like Squirrel make it possible for investors to buy into portfolios that have mortgages backing them. Depending on the financial stability of the mortgagees, this can be a very good investment that doesn't require taking out any loans at all.
About Squirrel Mortgage
Squirrel Mortgage is a New Zealand broker specializing in new mortgages, refinancing, and mortgage investments. It also offers mortgage advice, property advice, and property investments.