Is it worth the hassle of breaking a fixed mortgage to take up a lower rate? how much difference does a tiny change in the mortgage interest rate make? Is it worth breaking your fixed interest rate for a slight reduction? How do we know how long to fix for

 


Have you ever looked at a fixed interest rate that was slightly lower than your one and wondered if you could get a better deal?  Did you wonder if it was worth the hassle?  

Today I am going to share with you one of my mortgages and the exact figures of what happened when I looked at breaking a fixed rate and refixing it.  This is the exact figures from the bank, not embellished or exaggerated in any way.  Numbers don't lie!

The mortgage was a small one of $43,477
It was fixed at 6.44%
I was paying $350/fortnight
It had 13 years to go

There was an advertised rate of 5.99% for three years.  I wondered if that small difference in rate would make a difference.  

The bank advised there would a break fee (it almost sounded like a threat and that it would make a really big dint in my bank account).  I asked them how much and they went away to find out and it was $72.94

The new mortgage looked like this:

The mortgage was $43,477
It was fixed at 5.99%
I am still paying $350/fortnight
It had 147 payments to go

Firstly, it was very interesting the bank had worded it differently, so when they stated what the existing mortgage was, they said it had 13 years to go.  Yet the quote for the new mortgage said it had 147 payments to go which is 5.6 years to go.  This was not made crystal clear as their wording was different.

When I look at whether this was worth it, you can see that it absolutely was.  

$350 x 26 fortnights x 7.4years reduced = $67,340 saved on a mortgage that is only $43,477

Please read over the last few paragraphs over and over so you can see what actually happened here, it is crazy we are not checking this on a daily basis.

There is a site called interest.co.nz that is updated each day, it shows all of the interest rates for all of the banking institutions, if you bank is not showing the lowest rate advertised, you can ask them to match it, and most of the time they will match the other banks to keep your business.  We can haggle for interest rates like we would for anything else.

Please have a look through my other blogs, you will find amazing tips and tricks.  I am a registered Financial Advice Provider and qualifies Financial Adviser.  

Feel free to question, comment and follow my blog and my facebook page, you will save money and my hope is it will help you through this tricky financial time we are having.  Look after yourself and understand you don't need a mortgage broker or anyone to help you through this, just go directly to the bank and refix at the lowest interest rate they have on offer, then ask them for a lower one, let me know how you get on.







Comments

  1. Anonymous12 June 2023 at 09:12

    Really valuable advice 😀

    ReplyDelete
  2. Anonymous18 June 2023 at 08:47

    Great advice thanks Sarah, Do you know if the banks hold the break fee at the same if you want to think a change over? I remember asking the bank and they said it changes on a daily basis - cheers Shawn

    ReplyDelete
  3. Grannie Sarah's Solutions21 June 2023 at 15:55

    Hi Shawn, sorry for the delay in getting back to you, the banks only hold the break fee for a few days, best to get them to calculate it just prior to you changing. They are pretty small but you are within your rights to ring and ask every day if you want to.

    ReplyDelete

Post a Comment

Granny Sarah's most popular Solutions

The concept of contents insurance. Replacement of things from insurance. How much to insure things for?

Image
It is interesting when we get insurance, any form of insurance, we are advised by the person who is selling it to us.  Let's think about that for a moment......... Lots of things in life are like that, salespeople are supposedly the experts in their field.   In the 70s my dad was a mechanic, he also sold cars, the cars he serviced, so he was the expert, he knew about cars intimately!  Still does!  Things have changed dramatically, we now have specialist car sales people, that's all they do, they know a minimal amount about the actual mechanics of the vehicle and their only job is to sell it to you.   Insurance sales people are the same as that.  At the end of the day, their job is to sell a product that "suits" you.  They are in the business of selling and that is how they earn their keep, we have to respect them for that.   I was sold very high contents insurance,  I had it for many years.  I did a lot of research in this space and I guess the thing is, we are paying
Read more

Am I losing money on my Kiwisaver? Is it a good investment? What is really happening? How can I find out what my real return is when comparing it to other investments?

Image
  Is Kiwisaver "worth it"?  One of the most common questions I get asked.   The simple answer is absolutely!! My Kiwisaver figures are above, the one on the left is the amount I have contributed, the top line is what I have personally put into it.  The numbers on the right are what my Kiwisaver balance is today. I have been in Kiwisaver since day one so a long time now, but the deductions from my salary over the years has been $42,603, my Kiwisaver net balance is $114,368. Basically, the return is ridiculously high, I challenge anyone to get a this type of return on investment anywhere.  When people say, "I have lost $5,000 on my Kiwisaver, it is ripping me off"  I challenge them to look at these two screenshots for themselves. The one on the left is from the Inland Revenue Department and anyone can get it in about five minutes by logging in, or longer if you have to call them, unfortunately the wait time can be horrendous.  I feel for the people that work there act
Read more

The joy of interacting with people "in person" is it overrated? What happens when we bump into someone face to face? Should we talk to strangers?

Image
  The importance of physical interaction with people, family, friends, strangers, just people as opposed to online!! Due to COVID and all sorts of other events, like cyclones and difficulties getting around on our roads, there have been a lot of cancellations and times where we haven't been able to interact with those we love.  Communities have been missing out on vital physical social interaction.  Sure, everyone is on social media and in contact through their phones and the internet, but not in the same room. It has been a tough last week in my local community.  I have had people in tears in my classes, over a very special young person taken way too soon.   As a community we gave him the most beautiful, sad, incredible send off, his friends and family were amazing.  Of a town of around 4000 people there were about 2000 people in attendance.  What a beautiful community, we needed to get together to grieve.  It made me think of the importance of support in a purely physical way tha
Read more