What is the easiest way to save a million dollars? How can the average person do this? Not nearly as difficult as you might think.


This photo is of the most amazing group of people, who recently completed my class.  Some of them have come onto a "graduate" class in order to keep refining their skills in finance.

This week one of them saved over $1,000,000  let me share with you what we did in order for that to happen.

They had two mortgages, one on their home and one on their rental, they also had their own business and earned wages as well, working every moment God gave them.  They had a long time left to pay on their mortgage.

Their mortgage was with, what is called a Non-bank Mortgage Provider.  If you are with one, please do all you can to move away from them.  They often get you signed up to "interest only" deals in order to get you your first home.  For those who don't know what an "interest only" deal is, it is when you, literally, only pay the interest on your home loan, this results in your home loan never reducing!  Ever!

These Non-bank Mortgage Providers, also have their own Mortgage Brokers.  They tend to be used when a normal mortgage through the normal channels is not, for whatever reason, available to the home buyer.

In a nutshell the terms are different.  In this particular situation the best fixed interest rate was 7.99%, when the best offer from the banks as of today is 5.99%.  Simply by moving their mortgage to the bank rather than their current provider their rate is reduced dramatically.

They were also paying monthly repayments, my advice is to change these to fortnightly payments as this would mean, each year they would make 26 payments half the size of the monthly payments, which would only have made 12 payments (or 24 half months), so 2 more payments a year, which would dramatically reduce the term of the payments.

The other piece of advice I gave them was to "round up" their payments to the nearest 100, which was about $15 per week more, this also dramatically reduced their repayments.

As a group we calculated what would happen after rounding up, paying fortnightly, and changing to a bank, and found that the term would reduce from 30 years to 9, if it was to remain at 30, she would have had to pay over $1,000,000 more in repayments!!  In short, she saved over $1,000,000

Everyone in the room was gobsmacked, but the numbers didn't lie, we double and triple checked them and sure enough we came out with the same.

They also have plenty of equity (the difference between the price of your homes and the amount owed on them) to go to the bank and qualify easily for a changeover.

Please keep an eye on your mortgage.  There is no loyalty to the mortgage adviser that got you the mortgage or the company that gave it to you.  Keep an eye out for the best deal.  While jumping from bank to bank is not ideal and can be time consuming, remember, how many hours/weeks/months/years do you have to work to save $1,000,000?  If you spend a week changing mortgage companies it is a great hourly rate!

All of you can check that you are on the cheapest rate, make sure you are on the best rate your bank has to offer, don't worry about the break fee, ask them how much it is and then just break it.  Keep your repayment amounts the same rather than go with the temptation to lower the repayments when the rate drops.

All of you can make sure you are paying fortnightly as opposed to monthly or weekly, it is by far the best way to pay off your mortgage faster.

All of you can round up your mortgage payments to the nearest hundred.  Maybe not all of you with the cost of living as it is, but ask yourself:  "Do I waste, $20 per week?"  If the answer is yes, it might as well be going on the mortgage to get you ahead faster.

I hope you enjoy my blogs and I truly hope they help you, have a wonderful day out there and remember, you truly can do this, back yourself!!  Feel free to share, follow or comment on my blog or my posts,  happy for you to question as well.


Comments

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...
Read more

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

Image
  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...
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 ...
Read more