Did you know that by re-fixing your mortgage at a lower rate and making the same monthly/fortnightly payments, you could reduce your mortgage by 7 to 10 years!
For many homeowners, repaying your mortgage is a constant and regular task that often takes a large amount of your total average earnings. Most people like to lock in a set payment amount through fixed interest rates and fixed monthly repayments as this provides peace of mind.
However, many people are unaware that fixed interest rates and fixed repayment periods can be adjusted.
Find out more about how you can save thousands of dollars and considerably reduce the time it takes to pay your mortgage off!
Why Refix Your Mortgage?
Most homeowners set their mortgage rates and wait until the fixed term is over and sign up to the same rates for another set term.
However by re-fixing your mortgage you have the potential to take advantage of the market movements and reduce your current rates, while avoiding any increases in your payments for the next term.
Refixing your mortgage can occur at anytime, for most people they do this at the end of their fixed term agreement or 50-60 days (each bank varies) prior to the expiry date. Often when a fixed rate mortgage is coming to the end of its term your bank will try to determine your new rate which may be at the same rate or higher.
What you may not be unaware of is the negotiating power you have for reducing fixed rate terms.
What Are the Break Fee Costs?
When the market environment is in your favour and market rates are low this is the best time to be re-fixing your mortgage. Terminating your current fixed term agreement before beginning a new fixed rate agreement will however cost you a small fee.
Break fee costs are a one off payment made from you to your bank as compensation for changing the agreement terms. The cost of this depends on your current interest rate you are committed to, the amount of your loan and the term left to run in your current agreement.
Break fee costs are often small compared to the larger savings you are likely to make from switching to a lower repayment rate.
The difference in repayments between a $500,000 loan at 6.5% and a loan at the current cheapest two-year rate of 4.65% is about $895 a fortnight, you would save the cost of the break fee in just 10 months.
The goal here is to re-fix your mortgage at a better rate so that the interest savings make the break fee worthwhile.
How to Negotiate the Best Rate
Like any major decision that could impact the next 1 to 5 years of your life, it is important to get expert advice. Mortgage brokers can negotiate a better fixed rate on your behalf due to their sound understanding of the financial market and getting the best deal for your situation.
Refixing with Mike Whittaker Mortgages is 100% free and we will personally assess your individual circumstances providing you with the best possible options.
Give Mike a call on 0800 579 324 to discuss your options for re-fixing and save years on your mortgage!
