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

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