Mortgage Refinance – DIY


With home loan interest rates at historic lows as Reserve Bank governor Glenn Stevens has given the green light to a further cut in interest rates next week

My email inbox is frequently flooded with mortgage refinance offers – even from my current mortgage company. And it seems no matter what site I’m on; the web is drowning in banners ads and pop-ups touting unbelievable deals for mortgage refinance.




You’ve likely seen these same things and it has probably made you skeptical. Well, it should. I have been alternately amazed and disgusted at some of the marketing tactics these companies employ. They are at best misleading and in extreme cases, dishonest.


The reality of today’s mortgage market is that it is more difficult to get a mortgage than these overly optimistic advertisements and emails would lead you to believe.


Long gone are the days when all you needed was a credit score and the ability to fog a mirror in order to obtain high loan- to-value financing on a home you owned or would like to purchase.


The renewed focus on the veracity of a borrower’s credit, collateral (home value) and capacity (income to expense ratio) is a good thing to help avoid a repeat of what has happened elsewhere in the world. The tightening of credit standards for new mortgages and the steep decline we’ve experienced in property values, however, have made it more difficult to complete a refinance transaction.

Even if all factors were lined up in your favour, there is still the cost of home loan refinancing combined with the fact that, unless you are changing your loan term, you will be starting all over again with 360 payments to be made on your shiny new loan.


If you find yourself in this situation, then there is a way for you to get close to today’s market rates on the mortgage you already have without the hassle or expense of refinancing. This doesn’t involve any crazy schemes or expensive programs.


Pay A Little More

All you need to do to reduce your mortgage interest expense is add a small amount of additional principal with each payment to force your loan’s amortization schedule to accelerate. To be clear, this will not reduce your interest rate or APR, nor will it in any way change the required monthly mortgage payment over time. Those things will always remain the same as long as you have that mortgage.


If you put this into practice with the very first payment you make on your mortgage you could knock approximately six years off your repayment schedule. Even if you have been paying on your loan for a number of years you can still generate significant savings without paying to refinance or resetting the number of payments due on your loan.

A Little Goes a Long Way

If you were to start paying 1/12th of your monthly mortgage payment (principal and interest) extra every month you would reduce your interest expense. Additionally, your mortgage would be fully repaid up to six years earlier.

Before you go through the arduous process of trying to refinance your home, consider a do-it-yourself mortgage refinance. While you will be paying more per month, not less, you don’t have to come out of pocket for or capitalise the cost of a refinance transaction.

As you see a one percent difference in rate with all other variables constant equates to only $100 a month in savings. If you’re going to have to drop $4,000 or more to refinance it makes a lot more sense to come out of pocket a little more each month and directly impact your principal balance rather than adding to your overall borrowing expense.