Sky Unlimited || Mortgages

Buying a house is one of the largest investments you will probably make in your life. Most people regard this as a single financial event. But what is seldom realized is that in a mortgage transaction, there are in fact 3 major financial transactions taking place simultaneously.From an investor’s viewpoint, these 3 transactions are:taking a long position on a real estate investmenttaking a short position on a currency, e.g. the Euro, while taking a position on the yield curve. In fact, you are shorting a large bond position. In the investment world, under any other circumstance this would be regarded as a highly speculative trade.In order to pay off the mortgage, a large scale savings or investment plan must be established.As such, buying real estate financed through a mortgage is regarded by Sky Unlimited as the single most important element of any personal financial plan.From a typical real estate buyer’s perspective, the following questions may come up in the complicated process of finding the right mortgage instrument: How can you determine what is the best mortgage for you? How do you define what’s “best” anyway? How does your mortgage fit into your personal financial plan? How can you keep track of all the laws, tax implications and the best structure for a mortgage?With regard to your mortgage provider, the following questions may come up:

Is my provider able to come up with the full spectrum of possible mortgage structures?
How does the provider make his money, and how much?
How knowledgeable is my advisor?
Is my advisor independent, or is his advice geared to his commission structure?
Am I talking to an advisor, or a salesperson who is trying to sell me financial products?

Providers
There are many banks and insurance companies that provide mortgages. Combined, they offer many (hundreds) types of mortgages, combinations and derivatives.

There are many commission-driven salespeople and intermediates, who are very motivated to sell you all kinds of financial products that you may not require at all or that do not relate to financing a home.

As long as an advisor is not directly paid by you, there is serious reason to doubt his independence and his motivation to provide you with the best possible deal. As long as an advisor is employed by the same bank offering to provide you with a mortgage, you can expect to be presented only with mortgage constructions or products offered by this bank. You might be missing out on a number of better ideas.

Other factors
There are many ways to pay for a mortgage, and there are many money managersor private equity managers who provide services in this field. Each of them has a unique approach and cost structure.

In The Netherlands, there are many unique and complicated tax laws and legal aspects involved when buying, owning and financing a home.

Sky Unlimited
Through extensive briefings and personal meetings, Sky Unlimited will guide you through the entire process of buying and financing a home. Step by step, as long as it takes.

Sky Unlimited does not work on a commission basis, but instead is paid directly by its customers. This means we have nothing to sell to you but our expertise.
It also means that we are not limited to a predetermined construction or outcome.
Last but not least it means we can operate completely independently and can be creative in finding the best solution for you!

In our view your mortgage should meet the following criteria:

fully comprehensive and transparent
cost efficient
safe from unwelcome surprises
flexible, easily adaptable to changes in your financial life
covered for risks that you do not wish to take.

A mortgage should be regarded as a financial plan in itself, and therefore we think the following parameters, which form the cornerstones of any financial plan, also apply to a mortgage:

cash flow (on a net per month basis)
assets, asset allocation, saving and investing
risk and reward

Interest
Structuring the interest component of a mortgage must be carried out with great care. Deciding on an interest rate is literally a gamble on the future value of money.
There are three basic types of mortgage interest:

variable (based upon the Euribor interest rate), which gives the maximum flexibility and the lowest cost (net per month). But monthly costs rise (or fall) in concert with interest rates set by the ECB (European Central Bank).
fixed (e.g. for 5 or 10 years). Provides the peace of mind of a fixed monthly payment for years to come. But this security doesn’t often come cheap and generally implies a significantly higher monthly payment and more rigid terms.
built-in rate option structure. For people wishing the best of both worlds, it is possible to combine the two: a variable rate with a small premium that gives insurance when long-term interest rates rise, combined with a fixed rate instrument. Should rates indeed rise, you can exercise your option and lock-in the lower long-term interest rate of the fixed-rate instrument.

Saving / Investing
Should the size of your mortgage exceed a certain percentage of your net worth, you may be required to build up collateral capital for the duration of the mortgage. This can be done through a savings or investment plan of a combination of both. At Sky Unlimited we believe that this savings or investment plan should be lodged with a money manager other than the mortgage provider. Furthermore, we believe that your financial exposure to a mortgage provider should be kept to a minimum. This keeps your mortgage flexible, simple and affordable.

Insurance
As another form of security, many mortgage companies require that a mortgage beneficiary maintain a life insurance policy that covers the value of the mortgage in case of death or disability. As with saving / investing above, Sky Unlimited believes that if a life insurance policy is required, you should be able to choose your own insurance company. Also, the terms of this required insurance policy should be kept to the minimum in order to keep your mortgage flexible, simple and affordable