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How to save thousands on your mortgage

Discussion in 'Property Finance' started by sash, 12th Apr, 2016.

  1. sash

    sash Well-Known Member

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    Thought I would share what I started to do across my portfolio to save some coin.

    My average mortgage rate is around 4.68% (unfortunately some 4.79% fixes are an issue) as of a month ago...now I am in the process of dramatically reducing the cost of my collective mortgages.

    My target is being the average down to 4.22%. This would result in a saving of approximately $1700 per month or about 21k per annum or aobut 25k with some level of compounding.

    This is how it works....lets say you have loans of $2m.....reducing your interest rates from 4.7% to say 4.2% average would result in a 50 basis point or 0.5% saving...assuming IO that would equate to a 10k saving per annum.

    Yes...I know...I know..you can't get rates as low as 4.2% just on variable...but you can combining variable with fixed. Some fixed rates are as low as 3.99%..marry that to better variable rates of say 4.37%...and assuming a 50% split across both rates....you are at an average rate of 4.18%.

    I had to come with a strategy to pay for my holidays later this year and trade in amount for a new car this year. Ans this is the creative approach I came up with. :)
     
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  2. Mumbai

    Mumbai Well-Known Member

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    Good timing. I met my mortgage broker this weekend, going over the exact same thing.
    My average is around 4.56% and planning to bring them down to avg 4.2$, by doing exactly what you mentioned above. Just need to decide which loans to fix :)
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Lower rate = less interest. pretty obvious but worth pointing out.

    You just have to factor in the downsides - break costs, potentially, on sale or refinancing.
    With many people being potentially unable to qualify for further finance the need to refinance may be less so this may be less of an issue at this point.
     
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  4. sash

    sash Well-Known Member

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    I am actually breaking out of a few 4.79% rates ..the two I got quote today was a penalty of $545 and $516 plus one fee of $350 with CBA.

    The rates they will go to is 3.99%...so essentially with a tax deduction, the payback period is under 3 months.

    Yep...if your loans are say $2m that is a saving of $7200. :)
     
  5. Mumbai

    Mumbai Well-Known Member

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    Thankfully, I don't have to break any as they are all variable. Yup, the loans are closer to $2m. At one point, I had been thinking of selling one of the properties. But, I guess I can ride this 'slow' market with the refinance for now :)
     
  6. sash

    sash Well-Known Member

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    I have 30 place loans..

    4 fully paid off so no loans
    2 under construction so no rent...variable loans with 1 ready to be fixed
    5 with offsets with not payments being made
    5 fixed (2 about be broken)
    14 variable loans of which I will probably fix 7
     
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  7. MTR

    MTR Well-Known Member Premium Member

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    Sash
    I just got 4.12% with AMP, I know unusual but it took one phone call, no jumping hoops
     
  8. Elives

    Elives Well-Known Member

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    i've never thought about fixing before. if you have a property say 300k fix 150k and 150k is variable. the property goes up in value 60k and you want to take equity out. how does that work? can you take 80% of the 60k out? or only half as half of your original loan is fixed? :s
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Assuming you service with that lender,AND the valuer agrees with the value AND the lenders policy allows it, then yes 80 % of the 60k should be available

    ta
    rolf
     
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  10. sash

    sash Well-Known Member

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    I am presuming this is the basic rate? With no offset facilities?

    Great rate....but I need offsets for my cashflow to go into..
     
  11. devank

    devank Look, lets just get on with this, ok? Premium Member

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    Who is giving fixed rate at 3.99%? What's the loan amount and LVR?
     
  12. sash

    sash Well-Known Member

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    80%....SunCorp....3.99%....250k each....equity pullout of approx. 60k and 100k each!
     
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  13. Elives

    Elives Well-Known Member

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    so basically it's the same as if you had a 100% variable loan? do any lenders not allow you to do this once you fix a portion of your loan?
     
  14. sash

    sash Well-Known Member

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    You can...they can create another loan...though it depends on the lender.

    Getting out of a loan is not as costly as you think...
     
  15. euro73

    euro73 Well-Known Member Business Member

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    I have an average rate of 4.2% and I/O that runs until late 2024 on the majority of my debt, so I'm not going to tinker with that. Even if I can get slighter cheaper rates elsewhere, the I/O facility in place is too valuable to mess around with.
     
  16. meme plecko

    meme plecko Well-Known Member

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    That's great average @euro73, with lots of your loans on NRAS properties too
     
  17. sash

    sash Well-Known Member

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    Agree...they are shutting the IO periods...the future could be only for a period of 5 years.
     
  18. VB King

    VB King Well-Known Member

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    Fixed loans have restrictions on extra payments. Generally, as a salary slave I can forecast pretty well how much I may be able to pay off in the next year or two. I'll quite happily fix a great rate any portion of my lending above that amount.
     
  19. sash

    sash Well-Known Member

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    True...because I have quite a few loans...I still have a few that are variable to funnel salary into offsets.
     
  20. MTR

    MTR Well-Known Member Premium Member

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    offset facility, no not basic rate. Tried this one with a couple of other banks would not so this low