Want to pay more off your mortgage but can't afford it? I have some ideas for you to consider that won't sting! How to shop around.

 

We all know that if we pay more each week, our mortgage will reduce accordingly.  Most of us have no way of affording this.  

I have some tips and tricks to do this so it won't sting.  Nor surprises there!   I will be sharing these with you.  Please make sure you have read previous blogs so that you have a full understanding of this concept.

I am going to refer to the previous blog about fixed mortgages and what they mean.  We discussed the problem of having to refix now at a higher interest rate and what that means to us.

I had an interesting conversation with a couple today with regards to their house, car and contents insurance.  They bought me their annual renewal from their current provider.  I had a little look and I had a couple of thoughts that could get their insurance premiums down:

• Change their car insurance to third party, fire and theft from full cover.  That way their car (that was worth about $5,000) would not be covered unless stolen or burnt. They would be covered for any damage they did to other vehicles or property.  They were happy with that.
• Increase their excess on their house insurance.  Most claims for damage to homes are large claims so this will only be a small percentage of the total claim.
• Decrease their excess on their contents insurance, and decrease the amount as I discussed in a previous blog, you can read about this here:  https://granniesarahssolutions.blogspot.com/2023/04/the-concept-of-contents-insurance.html 
• Shop around, I tell people to have a look at https://www.trademeinsurance.co.nz/?utm_source=trademe_preview&utm_medium=NavBar&utm_content=TradeMe&utm_campaign=TradeMe_header  put in your information and see what they come up with, you might be surprised.

This particular couple, by changing the few things above, in about 10 minutes came up with the following:

Car insurance goes from $39.80/ftnt to $14,39/ftnt

House insurance goes from $177.24/ftnt to $60.27/ftnt

Contents insurance goes from $37.13/ftnt to $15.03/ftnt

Total fortnightly payment goes from $254,17 with the existing insurer

to

Total fortnightly payments to $89.69 with Trademe Insurance

Total saving of $164,78 per fortnight just by changing to Trademe Insurance!

While this is not a promotion of that particular insurance company, it is definitely worth shopping around to see what you can save.  

That saving can, and should be, put towards your mortgage, if we look at the example from my previous blog that looks like this:

Lets imagine you have a $400,000 mortgage, you have been on a fixed rate of 2.95% and it is coming up for renewal this month.  Currently your mortgage looks like this:

• $400,000    $1,885/mth    25 yrs    2.95%    Interest paid over term of loan $166,147

At thig point you are feeling all rosy and things are OK.  However, if you choose to turn a blind eye and do nothing, this is what can happen!  Look at the difference in repayments and the difference in interest paid over term!

• $400,000     $3,017/mth    25 yrs    7.74%  Interest paid over term of loan $506,648

So when thinking of the best thing to do, lets fix at the cheapest rate at the moment which, at this particular bank is 18mths at 6.49%, that will mean things will looks like this:

• $400,000    $2,696/mth    25 yrs    6.49%    Interest paid over term of loan $410,550

There are a few things you can do to further help you in this situation.  In this scenario you can change your repayments to fortnightly. and keep the term at 25 years.  If you do that, this happens:

• $400,000    $1,240/ftnt    25 yrs    6.49%    Interest paid over term of loan $410,255

Find out another bank if offering a better rate of 6.29% ask the bank to match it and this happens:

• $400,000    $1,217/ftnt    25 yrs    6.29%    Interest paid over term of loan $395,381

If we now look at the savings of $164.78 per fortnight from insurance and add that to the mix, it looks like this

• $400,000 $1052 + $164.78/ftnt 25 yrs 6.29%  Interest paid over tern of loan $395,381

While this may not seem a big change, we now have minimised the increase in the interest rate to our weekly income substantially, 

we were paying $1885/mth, or $942.50 /ftnt and n

now are paying $1052/ftnt, plus the insurance savings, 

we only need to find an extra $109.50/ftnt or $58.75/wk.  

At the beginning of this example, we were looking at an additional $1,132/mth or $283/wk

By putting that saved insurance premium money in there it has saved us an awful lot of money.

I know there are a lot of numbers above and a lot of back and forth.  It is so so so so so important that you understand this if you have a mortgage.  Have a play with different insurance providers and see how much you can save with this.  The above are actual figures of a real life example.  These people were so concerned that they couldn't come up with an extra $283/wk to keep afloat.

Please feel free to ask questions, or indeed to proof read my figures, I do my best, but I get so excited sometimes I go too fast when I am trying to save people money.  😇

Good luck out there, I would love to know if you find big savings, or even if you don't please let me know.

I hope you are enjoying my blog, feel free to follow, comment, or share, I appreciate your support I hope I can help you!