Pay £34,000 Less For Your Mortgage!

Here's how smart homeowners can slice a huge chunk off their mortgage with minimal effort.

When it comes to borrowing money, there are two Golden Rules that you should keep in mind:First Golden Rule: don't borrow more than you can comfortably afford to repay, otherwise your debt will become a burden and life will become a struggle.Second Golden Rule: pay as little interest as you can (or even none at all with a 0% credit card!).Of course, the more you borrow, the larger your interest bill, all other things being equal. So, which is your largest debt? For most homeowners, it's their mortgage. Hence, one of the cornerstones of good money management is to minimise the costs of your home loan.Let me show you how much is at stake, using the Fool's mortgage calculator and two very different borrowers, whom we'll call Derek Daft and Steve Smart.Mr Daft and Mr Smart have identical mortgages: they've both borrowed £100,000 over 25 years via a repayment mortgage.Derek Daft went into his local bank branch and signed up for a two-year discounted deal, which meant that he paid 5% a year for two years. After this deal ended, Derek's mortgage repayments jumped considerably, as he was now paying his lender's standard variable rate (SVR), which was 7% a year.Derek intended to switch to a lower rate, but, somehow, never quite got around to it. In fact, he ended up paying his lender's SVR (7%) for the remaining 23 years of his mortgage! Hence, over 25 years, Mr Daft paid the following:First two years: 24 x £584.59 = £14,030.16Next 23 years: 276 x £706.77 = £195,068.52Total: £209,098.68Derek Daft's interest bill: £109,098.68Steve Smart signed up for exactly the same two-year deal as Derek Daft did, but Steve really didn't fancy paying his lender's SVR of 7% a year, so he started looking around for a better deal before his discount expired. He found another attractive deal, switched to it, and repeated this exercise throughout the life of his mortgage. In fact, Steve was a very successful rate tart and ended up paying 5% a year for the full 25 years. So, Mr Smart paid the following:25 years: 300 x £584.59 = £175,377Steve Smart's interest bill: £75,377So, in return for a couple of hours' effort every few years, Steve Smart paid an astonishing £33,721.68 less than Derek Daft did for exactly the same debt. Indeed, Derek Daft paid four-ninths (45%) more interest than Steve Smart did, as each pound Derek borrowed cost him £1.09 in interest, whereas each of Steve's pounds cost him just 75p in interest.So, the moral of this story is: if you don't keep your mortgage on its toes by switching to a lower rate with your lender or one of its rivals, then the extra long-term cost can be horrendous. So, don't ever lose track of the terms of your mortgage deal -- and be prepared to switch as soon as the opportunity presents itself!Naturally, how much you personally could save from switching will depend on the size of your loan, your existing interest rate, and so on. However, choosing the perfect home loan from a range of 8,500 mortgages is almost impossible, so my advice is to employ an independent expert, such as no-fee mortgage broker London & Country Mortgages.You'll find this award-winning firm, plus a range of handsome home loans, in the Fool's brand-newMortgage centre, which was launched yesterday. As well as mortgage calculators, there is also a 'Product of the Week', which will often offer you a better rate than you can get by going direct to the lender.So, who are you going to be today: Derek Daft or Steve Smart? Visit our new Mortgage centre today!