Why your mortgage strategy could be holding you back

When you’re buying property and taking on a large amount of new mortgage debt, it's crucial that you think about getting the right mortgage structure.

By mortgage structure I don’t just mean the interest rates or fixed terms you opt for – those things are important but, given the marginal difference they make to how much you ultimately pay the bank, they get more attention than they deserve.

Strategic mortgage structuring can be a key driver in achieving financial resilience and freedom. Done correctly, consolidating debts and reallocating resources gives you more flexibility and agency in your managing finances. You’re better able to weather financial storms, and can adapt to changing circumstances, such as unexpected expenses or shifts in income.

Beyond your mortgage, it also helps to enable long-term wealth accumulation – increasing your net worth over time further enhances financial security and opens up opportunities for future investments.

As an example of how this works in practice, a couple I worked with had two properties and a $900,000 debt burden. That felt overwhelming to them, and, ultimately, they wanted to feel more secure by reducing that debt, and wanted to create the headspace and the resources to think about growing wealth for the future.

Our first step was to consolidate their debts by refinancing. The goal was to focus the debt on just one property, rather than across two. The rationale is that freeing one property (their home) from being tied to the debt boosted their financial resilience significantly and took them from a moderate position to a highly secure one.

With that one move, they gained stability and no longer had to worry about selling properties if they came under financial pressure. When property is cross-secured with one bank, the bank calls the shots in the event of a default or mortgagee sale. That is, you don’t get to choose which property is sold to repay the debt, and I’ve seen examples of the bank opting to sell the home, which can be devastating and hugely destabilising.

Our next move was to structure the debt we’d refinanced. The goal was to set a path to clear their mortgage as fast as possible. But, given we’d just worked on building resilience, we didn’t want inadvertently to undermine that, which is why the structure is important.

The general rule of thumb is, if you can repay your mortgage faster – great – but ensure you’re able to reaccess as much of that as possible. That preserves your resilience and gives you flexibility.

Making a lump-sum payment is laudable, but it means that if you needed it you’d have to apply to the bank to get it and in my experience when you need it the most is often when the bank will say no. The structure you settle on should be closely connected to the pace at which you can repay the debt – this is particularly important while interest rates are high, as the ‘cost’ of not achieving the goal is more significant.

That means you also need robust financial management, which is where many people fall down.

So, all of this begins with creating a plan and understanding your position – whether you’re playing your hand right or need a different strategy. That means identifying the competitive advantages you have alongside the right investment and money-management strategy – but it’s also about knowing yourself.

What I mean by that is, even when you’re paying your mortgage down in a fraction of the time, property is still an investment option that requires patience and resilience, and knowing how you react to stress and adverse outcomes, not just when things go well.

Long-term success with your finances requires understanding your own weaknesses and strengths as much as the extremes of the market.

All of that success is built upon that initial foundation, learning how your property assets, mortgage set-up and investment opportunities work together. Then, how you manage debt, make investment moves and plan for retirement is what will skyrocket your wealth potential and investments over the long haul – and open a world of opportunity.