Yesterday was a very good day… I saved $94,126. Today was even better… I saved another $94,720! Yep, I was so thrilled, I had to stop myself from telling complete strangers on the street! So here's how I did it...
A few weeks ago we decided to get an updated valuation on our house. We were pretty pleased to find the market value had risen a whopping 10 per cent in just over a year (Auckland house prices for you!). The new valuation meant our equity had risen quite a bit, so I rang the bank and asked if we could have our interest rate reviewed. The bank agreed to drop our floating rate by .5% but kept our payments the same. I did a quick check of the numbers using the calculator on www.sorted.org.nz figuring we'd probably save a few thousand over the life of the term. But $94,126? I Fair to say I nearly fell off my chair when I saw the difference this small drop in interest made.
Today, I noticed the bank is offering an even lower rate… another .5% lower on a fixed term. But before fixing, I decided to see what difference it would make if I increased the payments to boot…
Over the past few months I've developed a very naughty habit of buying an espresso coffee every day. The coffee lady in my local café practically has it ready before I walk through the door! At $4.50 a day, that's $22.50 a week. Not a big deal really (or so I keep telling myself). But according to my handy-dandy mortgage calculator, by adding my cup of coffee to my mortgage payment instead, I'll save another $22,292 in interest and shave another year off my mortgage.
Obviously, everyone's mortgage calculations will differ, but one thing's for sure… a little extra payment saves a heaping helping of hard earned dosh! And it makes you feel pretty good about yourself for being so savvy. And if you can negotiate your interest rate down and keep your payments the same, then you're super savvy! Combine the two… and you're on to a real winner!
So in total… (let me double check my facts and calculations!!) In the past 24 hours I've reduced my mortgage interest by $188,846 and slashed eight years off the term! Seriously, can you believe that? WOW!
It's really got me thinking about how easy it is to get into the habit of just plodding along, paying the minimum because that's just what's easiest. I just couldn't believe that it was possible to save that sort of money without really doing anything!
Oh and this will make you laugh… upon telling hubby he suggested that we could go buy a Ferrari! My reply? "Ummmm, nooooo… But once the mortgage is all paid off, I'll shout you a coffee… I'm sure my café lady will be missing me by then! *wink*"
If you're keen to do your sums too, the website I used is https://www.sorted.org.nz/calculators/mortgage-manager