If you own a home, the chances are you went to the same bank you have banked with forever and got a mortgage. The lending manager advised you to fix your entire mortgage long term to give you certainty against rising interest rates.
By fixing all your debt the bank is guaranteed to make profit from you, and you can't break free from this arrangement. You can't even pay anything extra off without penalty fees. That banker has done a good job - FOR THE BANK, NOT YOU.
- Pay extra. If you pay an extra $20 per week on a $300,000 mortgage you will save about $55,000 in interest AND pay the mortgage off 4 years faster.
- Structure your loan so you can make extra payments without penalty fees. If you can make regular mortgage payments over and above the minimum, then you need to structure your loan to have this ability without being penalised.
- When you refinance, don't increase the term back out to 30 years. Yes you may be lowering your payments, but you will never pay your mortgage off this way. You should calculate your maximum weekly payments and reduce the term accordingly.
- Never pay monthly. You will pay more off your loan per annum by paying with fortnightly or weekly payments.
- Learn how to use revolving credits of offset loans. These can save you lots of money. But if you aren't good with budgeting they can also cost you!
