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Here's a story about the owner of a small house in a North Island provincial town who's on a modest salary.

He was paying interest on his mortgage at 6.2% and noticed he could borrow from the same bank at 4.9%. As he had enough equity in his home, he went to the bank and asked if he could get another mortgage at 4.9% so he could repay some of his 6.2% mortgage.

He negotiated the following:

• No bank charges
• Interest at 4.69% instead of 4.9%
• Repayment of 5% of the original loan, rather than 5% of the existing loan as the bank originally said was the maximum.

He did very well but he could have done even better. When he negotiated the original mortgage he might have been able to get an agreement to be able to repay a bigger lump sum, say 10%. He’ll do that next time.