Home Loan Interest Rate Creeping Up

For the last two years my home loan interest rate has been slowly creeping up. It started off around 3.89% and is now at 4.07% with one of the Big 4 banks. This has prompted me to look into other lenders to see what is on offer.

House Value: $450,000

Current Mortgage Balance: $284,000

4.07% Variable Principle and Interest 

$395 annual package fee

2 years into a 30 year loan. (planning on paying off loan over next 5/6 years with extra payments)

After contacting my current lender they have agreed to drop interest rate down from 4.07% to 3.92%

1 Email = Savings of $426 per year! not bad for 2 minutes of work.

I also search for best deal online.homeloaninterst

Best rate: 3.59% Variable P/I no offset but redraw. $0 annual fees

If I switch to this online lender, I would be saving $937 per year in interest + $395 annual fee = $1,332 per year!

There are a few fees in switching lenders to consider, discharge fee for my current loan $300, property title fee $179 and potential settlement fee $150.

I would also need to switch my everyday bank account over to avoid monthly fees to a fee-free online account. This would also involve contacting all direct debits to switch over.

If I switched over I wouldn’t have a offset account, this shouldn’t be a issue as I plan to pay the loan off early and never want to create a Investment Property out of it.

Should I do the paper work and make the switch?

What your current interest rate?

 

 

 

 

 

 

Paying a 30 year mortgage in 5 years!

Since discovering FI we have sold our money-hungry Investment Properties. So we can focus on paying off our own mortgage then we can invest into low cost index funds.

We started aggressively paying off our mortgage May 2018 – Planning on paying off our 30 Year mortgage in 5-6 Years.

By putting every spare dollar into the loan, we will need less income in retirement because we won’t have monthly mortgage payments.

Purchase Price: $470,000 September 2016

Minimum payment $1806/month

Aggressive Payments 5 Years: May 2018 $303,500

$5,575.73 Monthly

Aggressive Payments 6 Years: May 2018 $303,500

$4,734.50 Monthly

Average Payments as of August 2018

$5002.75

(This is a bit distorted due to our tax return)

We are currently on one income as Mrs FMT is staying at home with our daughter.

So far it looks like we are on track to reach our target of paying our 30 year mortgage in 5-6 years!

What you planning to do with your mortgage? Are you paying the minimum off your loan so you can invest?

 

Introduction to FI

FI or FIRE stands for Financial Independence/Financial Independence Retire Early.

The concept is spending less and saving more, investing the savings to create income to live on in the future.

One of the original bloggers in this space is Mr Money Mustache, in his post Shockingly Simple Math Behind Early Retirement he explains how easy it can be by spending less and investing to retire in under 10 years.

50% savings rate is the target for most FI people.

This seems huge compared to the 10% most average people save. Though it can be done by cutting a lot of the waste and unnecessary crap out of our first world lives.

Cost cutting ideas:

  • Cooking at home
  • Packing lunches for work
  • Buying cheap used cars opposed to loan or leasing new
  • Buying or renting affordable houses instead of million dollar mansions
  • Biking occasionally instead of driving car
  • Swapping Netflix for Foxtel
  • Optimizing mobile phone plans
  • Travel hacking holidays with points

More reading on FI can be found at links below –

Bogleheads Australia

Barefoot Investor

Aussie Firebug

Strong Money Australia

Vanguard Australia

USA based content

ChooseFI

Jim Collins Stock Series

Mr Money Mustache

Millennial Revolution

Share your favourite FI content in the comments below.