How Today Show's Pay Your Mortgage Competition could affect your loan

We’ve all daydreamed of winning the lottery, but what about winning a competition that could pay your mortgage for a year?

That’s exactly what the Today Show offered its viewers, with its competition that promised to pay over $30,000 towards the winner’s mortgage.

Today Show’s ‘Pay Your Mortgage For A Year’ Competition allowed Aussies to enter in 50 words or less why the Channel 9 show should pay their mortgage for an entire year. The amount paid to the winner is capped at a lump sum of $31,260, based on the average monthly mortgage as determined by ABS lending indicators for January 2022.

And while we all know the realistic chances of winning any competition, there is still a way everyday Aussies could also shave thousands off their home loan by refinancing.

Potential savings from the Today Show’s Pay Your Mortgage Competition

So, if you were lucky enough to win a competition like this, how much better off might your mortgage be from a lump sum payment of this size?

Firstly, it’s worth noting that the prize money is not paying your monthly mortgage repayments, but a one-time payment of $31,260. If you won the Today Show competition in this scenario, and your loan provider allowed for extra repayments, these funds would be made as a lump sum payment towards your mortgage.

On an average (ABS Lending Indicators) 30-year home loan of $602,035 on the average interest rate on the RateCity database of 3.09%, your repayments would be $30,810 in the first year, and $924,307 over 30 years.

RateCity crunched the numbers and found that on this same home loan, by winning this competition you may pay $1,600 less in the first year, but save $47,994 over the life of the loan.

Source: RateCity.com.au, Today Show Pay Your Mortgage For A Year Competition Terms & Conditions.

Note: Based on a hypothetical 30-year home loan. Loan amount of $602,035 based on ABS Lending Indicators released January 2022. Scenario 1 interest rate based on average home loan rate across RateCity database. Does not factor in fees or rate fluctuations. Data accurate as of 09/02/22.

How you could win by refinancing

Not everyone is lucky enough to one day find themselves $30,000 richer. But there are realistic steps everyday Aussies can make right now that may help to reduce the ongoing costs of their mortgage.

It may be up to you to make your own luck and give yourself a cheaper home loan by considering refinancing. If you’ve been repaying your mortgage for a few years and have built up a bit of equity, you may be able to refinance to a lower rate and/or lower fee lender.

In fact, on the same hypothetical home loan mentioned above, if you refinanced five years into your 30-year mortgage to Australia’s lowest variable interest rate of 1.77%, you may shave $104,888 off your mortgage.

Note: Based on a hypothetical 30-year home loan. Loan amount of $602,035 based on ABS Lending Indicators released January 2022. Scenario 1 interest rate based on average home loan rate across RateCity database. Includes average discharge fee of $350 while refinancing. Does not factor in ongoing fees or rate fluctuations. Data accurate as of 09/02/22.

This is because your home loan interest rate is one of the most significant costs associated with your mortgage repayments. Reducing your interest rate through refinancing is one option homeowners have to consider when trying to lower the amount they pay towards their mortgage over the life of the loan.

How to reduce your home loan repayments in 2022

With lenders across the nation tipping an RBA-led interest rate hike as early as August this year, homeowners may need to keep these options in mind if they find themselves struggling to repay their mortgage.

Refinancing to a lower rate home loan is just one option available to Aussies. But if the Today Show competition can teach us anything, it’s that there is great power in making extra repayments towards your home loan.

If your lender allows you to make additional repayments without penalty, redirecting your additional income into your home loan may help you chip away at your principal owing. Anything from salary bonuses and tax refunds to money earned selling goods on FaceBook Marketplace may be able to assist.

If the prospect of refinancing to a new lender feels intimidating right now, it’s also worth keeping in mind that you can always call your provider and ask for a lower rate. Lenders often reserve some of their more competitive interest rates for new customers, so why not pick up the phone and ask for one?

Lower rate home loans

Compare home loans in Australia