Navigating Financial Options: Is Mortgage Redraw or Asset Finance Better for You?
The Drawback of Mortgage Redraw At first glance, using a mortgage redraw facility to finance a new caravan, jet-ski or boat might seem appealing. It offers the convenience of accessing pre-paid funds and typically features a lower interest rate than a separate loan. However, this convenience masks a deeper financial pitfall: the long loan term. Mortgage loans are structured to be repaid over a long period, often up to 30 years. When you redraw from your mortgage to cover a significant expense, you’re essentially spreading the cost of that expense over the remaining term of your mortgage. This means that a $20,000 expense could end up costing significantly more in interest over 20 or 30 years, even at a lower rate, compared to other financing options with shorter terms. The Advantages of Asset Finance Asset finance offers a structured way to finance your purchase over a shorter period. This approach has several key benefits: Making the Right Choice While the allure of a lower interest rate on a mortgage redraw can be tempting, it’s crucial to consider the long-term implications of spreading the cost of a purchase over the life of your mortgage. Asset finance offers a compelling alternative, with benefits that include lower total interest costs, preservation of mortgage progress, dedicated repayment plans, and greater flexibility. Before deciding, chat to our expert and friendly team to explore your options based on your unique financial situation and long-term goals. Remember, the right financing choice can make a significant difference in your financial health and how quickly you achieve your dream life.