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Finance Consultant Explains How to Use Interest Rates to Swipe Years off Your Mortgage


Respected Australian Finance Consultant, Graham Couper-Smith of is helping Home Owners understand how getting a better deal can save years off their mortgage.

“Paying off your mortgage is like a rent-to-buy scheme,” Couper-Smith explained. “In this analogy, the interest on your mortgage is the rent. The bit of your repayment left over after paying the interest is the buying part of the scheme.”

Graham Couper-Smith explained that getting a cheaper interest rate is like getting a reduction in your rent, so that if you keep paying your previous payment you will own your home sooner.

“People ask me how much sooner they will pay off their home. The most important factors are usually the size of the reduction in interest rate, and the fees to get that deal.”

“I’ll give you a real example”, (changing the name for privacy):

  • Harry Homeowner has a loan of $263,000.
  • Harry’s interest rate is 8.56% Repayments $2,177/month (with approximately 24 years to run)
  • Refinanced at 6.09% at a cost of $1,250 in fees, the loan amount becomes ($263,000 + $1,250) = $264,250

If Harry keeps paying $2,177/month, his loan will be gone in under 16 years.

This is a stunning 8 year saving, simply by refinancing from a high rate to a low rate.

You may not have a rate as high as Harrys’ but it’s surprising how much difference interest rates make. Imagine Harry in 16 years. His home loan is gone. Another 8 years would seem a long time, and how good will he feel, knowing the mortgage is finished.

To work, this strategy requires just 3 critical factors:

  1. A better interest rate is available (it often is. Check with your broker.)
  2. The cost of changing to the cheaper loan must not outweigh your benefit.
  3. Despite a cheaper rate, you deliberately continue to pay the same amount in repayments.

This is general advice only and may not suit everybody depending on their situation. Readers should obtain specific advice based on their individual circumstances.


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