Flexi loans – they’re a dangerous thing. Banks can’t wait to give them to you all wrapped up in glossy paperwork and touted as the best thing ever. And yes, they are the best thing; the best thing for the bank, not you … unless you’re one of the chosen few with inordinate amounts of willpower and discipline (a financially savvy superstar).
For the rest of us, the flexi-mortgage tends to become a way of life (a life sentence that is). If you’re like most people, living on the flexi mortgage will change your financial behaviour for the worse and you’ll repay debt at a slower rate. It’s not just the day-to-day stuff that you end up paying extra interest on either. It’s also the big lumpy bits of cash that are so much easier to withdraw because you no longer need to endure those brown-trouser meetings grovelling to your bank manager. Ultimately, the ease of withdrawing money hides the true cost of debt and suddenly that cheap $5,000 holiday ends up costing $15,000 (over the life of the mortgage) and that new kitchen goes from $20,000 to $60,000 just as quickly.
It’s not easy being a grown up and if you’re not tracking where you’re headed financially it gets a whole lot harder long term. Who still wants to be working at 68 especially to pay off a holiday from twenty years ago? And save those arguments about just spending your homes capital gain for when you’ve actually got that hot cash in your hand and your debt fully repaid. The best thing you can do is be aware of what you’re doing so your decisions become deciplined and informed. It may sound geeky but actually writing down what you want out of your life and how your flexi loan stacks up against it will point you in a much smarter direction financially. Talk to us if you need help – it could take thousands off your debt and years off your working-life.
Copyright © 2014 Boutique Financial Limited Chartered Accountants Auckland. All Rights Reserved. This publication must be read in accordance with the attached disclaimer. The opinions expressed are the originators only and may not be the opinion of Boutique Financial Limited, Chartered Accountants Auckland. Boutique Financial Limited accepts no liability for any loss caused, either directly or indirectly, arising from this article. Discussions and conclusions reached are based upon facts provided and current legislation thus any change in the facts or legislation may alter the conclusions reached. This article is not intended to provide an exhaustive or comprehensive statement of tax law and should not be used as a substitute for considered written advice.