KIM MACDONALD: Mortgage rates are falling, but your bank won’t tell you, here’s how to push for a better deal

Your challenge, if you choose to accept it, will take you a few hours and save you tens of thousands of dollars.

You can of course, ignore this column, turn straight to sport pages and be full bottle on all things football time for dinner tonight.

Or you follow the instructions on reducing your mortgage rate and save enough money to buy a couple of round-the-world airfare ticket in 10 years.

If you are an owner occupier and your interest rate starts with a 6, you are paying too much.

In fact, Finder’s home loan expert Richard Whitten claims you should be looking at rates under 5.5 per cent if you really want a good deal in the current market.

If the Reserve Bank cuts the cash rate again in August, rates could fall closer to 5 per cent.

The first step is crucial. Search three lenders that offer lower mortgage rates. You must make sure you are comparing like for like, so you don’t mix owner-occupier rates with those for investors.

Once you’ve got these details, call your bank.

I must digress at this point out to highlight that banks have wised up to those of us who like to negotiate lower rates.

They know it is often a kneejerk reaction to getting a new bill, and they are pretty certain that if they delay you long enough that you will go back to your usual state of inertia and obsession with Harley Reid.

For that reason, they may test your patience.

They may put you on hold, subjecting you to some torturous elevator music, for a long time. They may ask you to email them, or to take a ticket, promising to call back when they can. They may delay that call.

But stay the course, my friend, stay the course.

Once you get to talk to someone, quote from the alternative interest rates and banks that you have researched, and ask them to match the rates.

At this point, I like to engage a gentle-at-the-edges steel-at-the-core kind of tone in my voice, as I explain to the bank staff how I am prepared to take my debt elsewhere this week if I can not get a better deal.

This is an important part of the step — explaining the other lender’s rates, not the attitude — because it shows that you are serious and ready to take immediate action.

There is always a risk that if you sound like you are just on a fishing expedition to see what you can get that they will fob you off with a very minimal saving.

Let them know that you know the market and you are prepared to use it to your advantage.

Mr Whitten believes that at the very least, most banks are happy to match the honeymoon rates they offer new customers.

It may be a one-year discount, which means you would have to repeat this process again when it expires.

If they do not reduce your mortgage to your satisfaction, I urge you to switch to a new bank.

It is of course, a hassle. And refinancing is not always recommended for those on a fixed rate because it could incur additional break fees. You will have to do the maths on whether it represents a saving when lumbered with a break fee.

But let’s come back to the tens of thousands of dollars I promised you at the start of this article.

If you have a $400,000 loan, and you currently pay 6.15 per cent interest, you will re-pay $784,200 over a 25-year loan.

If you switch to a 5.5 per cent rate, the total repayment will be $736,800 over the same period, which is a saving of $47,400 in that time.

If you really want to ramp up the savings, continue paying your home loan as if it were still at the original cost of 6.15 per cent interest after moving to the 5.5 per cent amount.

It is only an extra $158 each month but will shave even more off your total loan repayments.

What can you buy with almost $50,000 in 25 years?

How about a new car, a European family vacation, university fees or even a partial deposit on an investment property to pass on to your children?

It certainly seems well worth the effort.

A key point to remember is not to refinance to a longer term just to reduce the monthly repayments — if you are in a financial position.

As a general rule, the longer it takes to repay a loan, the more you repay.

A $400,000 loan paid over 20 years will cost you $448,500 in interest over 30 years at 5.5 per cent interest.

Pay that amount over 25 years, and you pay $361,500 and if you pay it within 20 years, you are up for only $279,000 in interest payments.

Now what is the latest on football?