"Innovations" in mortgage lending

Discussion in 'Share Investing Strategies, Theories & Education' started by PeterT, 27th Nov, 2017.

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  1. PeterT

    PeterT Active Member

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    Open question for all members of this forum, for a bit of background research I am conducting:

    Question: What would you consider as the “major innovations” in mortgage lending over your life time?

    You may well be yawning at the mention of something as mundane as mortgage lending, and possibly laughing at the notion that the word 'innovation' appears in the same sentence as 'mortgage'. But in terms of changes to the product that had such an impact that basically every lender had no choice but to follow suit, my two suggestions are:

    1. Fortnightly payments
    Paying half the monthly repayment amount fortnightly is a simple way to make extra repayments. In the back of my mind I think this was an idea Noel Whittaker originally introduced, I don’t know when, but grateful if anyone can share information.

    2. Offset accounts
    The notion of charging interest on only the “net debt”, taking into account the balance in current and/or savings accounts which might offset the mortgage debt, was a game changer as well, with a potentially significant impact in reducing the overall debt horizon of a mortgage. I have no idea where or when these were first introduced – was it Australia, the UK or somewhere else who first came up with this product? Again, grateful for anyone’s feedback on this.

    What else do forum members suggest? Both of the above are now quite old ideas. But are there any other changes to mainstream mortgage lending products or practices that forum members think qualify as genuine innovations?
     
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  2. twisted strategies

    twisted strategies Well-Known Member

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    ** 1. Fortnightly payments
    Paying half the monthly repayment amount fortnightly is a simple way to make extra repayments. In the back of my mind I think this was an idea Noel Whittaker originally introduced, I don’t know when, but grateful if anyone can share information. ***


    my mother did such with a non-major lender back in the 1960's earning a nice discount on the total cash paid when the mortgage was paid out ( enough to buy a nice second-hand car )

    excuses by major lenders since have included extra paperwork , extra handling , etc etc.

    one might suspect the major lenders dislike giving incentives to re-pay a mortgage early ( they are probably bundling them up into RMBS )

    Residential Mortgage-Backed Security (RMBS)

    one might shop around the smaller lenders who may be much more flexible to gain customers
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Lines of Credit
    - including not having to make repayments till the balance is reached
    Capitalising interest
    Split loans
    Limited Recourse Borrowings
    Third party loans
    Related party lending

    All these are pretty unique.
     
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