Whether the Reserve Bank raises rates this week or makes do with another warning, giving the mortgage a makeover is a good idea. The starting point would have to be deciding whether to fret or fix. The answer is don't do either. So what if interest rates rise? They're still so low you should be paying off more than you have to anyway. For all the nips and tucks you can make to your mortgage (I'm coming to them), there's no better wealth builder than paying it off as fast as you can. You know the drill: no gain without pain and all that.

Stepping up the repayments while you can is the liposuction of mortgage makeover. It's shock treatment that sucks out years of compounding interest but there's no mistaking the results. And these once-in-a-generation low rates are an opportunity too good to miss. "Do a Clayton's fix," says the head of consumer advocacy at Resi, Lisa Montgomery. So if you're on a 5.5 per cent rate (do you know what you're on? Most don't) and can fix at 6.75 per cent, then pretend that's exactly what you're doing. On a $250,000 mortgage over 30 years, the extra repayments of 1.25 percentage points would save $73,000 in interest all up. "When rates rise you have a buffer to help," Montgomery says. "In the meantime you're paying less interest."

Starting off from as low a base as possible would help, too. As the Rate Reckoner table from Canstar Cannex (right) shows, you can still get standard variable rates below 5 per cent. In fact the cheapest (despite a $345 annual fee), State Custodians (statecustodians.com.au) at 4.79 per cent, is only marginally dearer than a basic loan that, by the way, won't let you make extra or more frequent repayments. When you look at the comparison rate, which includes most fees (but not exit fees), it turns out to be the cheapest anyway, according to the independent Canstar Cannex. Since there's no application fee, it's hard to go wrong. Hard but not impossible, since it all depends on the exit fee of your current lender.

Unless you've had the mortgage for at least five years, the break cost will probably make switching uneconomic. Which brings me back to fixed rates: suffice to say, it's too late to fix. "Someone has to be the loser and it's rarely the lender," Montgomery says.

The banks have been lifting fixed rates for months and even the lowest rate of 6.5 per cent for three years, offered by ABS Building Society, is several rate rises away. Mind you, if it'll help you sleep at night you can always fix just part of the loan. But a better way of fixing is getting a mortgage with a honeymoon period. Resi has a 4.95 per cent two-year honeymoon rate, which then reverts to its standard variable of 5.25 per cent.

Did you notice its standard variable rate is below that of the banks? It's a win-win: you get a discount for two years, then you're moved to a relatively low rate anyway.

With any honeymoon offer, you should always check that the rate it reverts to is competitive. If it's not now, it won't be then. Mortgage brokers may be able to find even better deals. For all the talk of the banks tightening up (when all they're doing is applying the rules they used until two years ago) they're also keen to steal market share off each other.

Tony Harris, of Easy Living Finance, says he's just negotiated 1.13 percentage points off the first 12 months on a loan with St George – a honeymoon rate of 4.66 per cent. And a smaller lender, Opportune Home Loans, is offering a 4.36 per cent one-year honeymoon from its standard 5.39 per cent. "It's very competitive among the big five," Harris says. "We're finding if you push the lender you'll get another 10 basis points. We can get a discounted rate into the second year and that's very good." But you need to be a very fit borrower. "You don't want any cross on your credit history or it's not going to happen," he says. "Make sure you pay the credit card on time and don't incur any late or default fees. "You need to keep all your documentation such as payslips, previous rate notices, credit card statements and the like. "Anything not right will be chucked out."

Don't think the massage treatment is reserved for new customers, either. "Existing clients can squeeze the banks, too," Harris says.

One interesting variation on a theme is having a higher capped rate instead of a lower honeymoon rate. What good is that? Well since interest rates are rising it would be great to have a ceiling without paying more, as you have to by fixing. BankWest has the only variable rate loan with a cap but it may not be as good as it looks. Certainly you wouldn't quibble with the variable rate of 5.40 per cent. And better still, it'll lend up to 90 per cent of the value of the property, which is generous these days (the going rate is 80 per cent). Plus the cap of 7.5 per cent is in the realm of fixed terms. Or is it? It only goes to November 2012, so it's really a three year and one month term. And that sounds expensive. But it's the charges, starting with a $12 monthly fee, that could prove the biggest blemish on the product.

As well as the routine discounting and honeymoon offers, there are so-called professional packages that discount the variable rate by up to 70 basis points. Talk about a beauty spot. The professional treatment was once reserved for wealthier clients or big borrowers, if not as a last-resort bargaining tool, but just about anybody can get one now. There's a sizeable upfront fee in return for the big discount – but don't let that faze you. "There are good deals out here, hanging around at 5.1 per cent or 5.2 per cent," Montgomery says. Typically set at $350 a year, the charge replaces a host of other fees – and that includes credit cards – and pales into insignificance as the loan gets bigger. On a $500,000 mortgage, for instance, the annual fee is less than 0.1 of 1 per cent. Canstar Cannex's Mitchell Watson says the net gain, taking into account the lower rate and waiving of other fees, on a 25-year $350,000 mortgage is just over $1400 a year. Even so, you should still shop around. After all, the standard mortgages of some non-banks can be cheaper than the banks' professional packages.

Whether you have a professional package or not, there's a lot to be said for making more frequent repayments. Paying fortnightly instead of monthly will take off thousands in interest over the life of your (shorter) mortgage. Funnily enough, the extra frequency isn't the big deal; it's that there's one extra repayment in a year when you pay fortnightly (26 times) than monthly (24 times, if split in half). Another way of giving your mortgage a good workout is using an offset – a savings account attached to the mortgage where you can have your salary paid in – or a redraw facility, where you make extra repayments you can take out again later.

Lenders count anything in the offset account as a repayment, even though it isn't. The beauty of it is you save on your mortgage and get tax-free interest on your savings. An offset account might pay, say 5.5 per cent, or whatever your mortgage rate is, and it's tax-free. Compare this with an online bank account paying 4 per cent, which is taxed. So is it better than a redraw facility? For investors, yes. "For an investment property an offset account is perfect," Montgomery says. "It doesn't come off the principal of the loan so it's better for negative gearing." But for owner occupiers "either is OK.

I prefer a redraw because then I'm less likely to take it out of the bank. You've paid into the mortgage so you think you shouldn't touch it. I like that discipline," she says. Still, an offset can save on fees, too. Stick your salary into it and use a no-fee credit card for all your expenses. Good practice would then be to sweep some money out of your offset account and pay off the credit card.

Checklist

Give your mortgage a makeover if it has:

Monthly fees.

An interest rate above 5.80 per cent.

A switching fee.

No offset or redraw facility.

Fees for an offset or redraw transaction.

Restrictions on frequency of repayments.

No linked debit or credit card.

Case study

It wasn't so much the high interest rates they were paying as the bad service that prompted Danielle and Nick Giitsidis to look for another lender. But, as it turned out, they've slashed the interest rate, pay lower fees and have the bells and whistles of a mortgage they want. "I'd met Fairien Azeem of Mortgage Choice at a women's networking meeting," Danielle says. But the last straw for her was when the bank gave them the run-around for a $60,000 loan for her new business as an outlet for a wholesale phone group.

Despite being a customer for more than 12 years, and so far ahead on their mortgage repayments they would have qualified for a $200,000 mortgage at least, the bank was so tardy she almost missed the franchise. And to rub salt in the wound, when it did come the loan was split into three parts, each one with a higher interest rate, starting at 7.5 per cent and ending at 9 per cent. The standard bank variable rate is about 5.75 per cent. The triple-decker loan wouldn't even allow internet banking, much less fortnightly repayments. "You had to wait for the statement to come to see what's gone through," Danielle says. "So we showed Fairien where we're at, where we want to go and this is our problem in the middle."

Danielle's loans had been built in a ramshackle manner and she later discovered they had their own account manager, except whenever she called he'd just "been transferred somewhere. We kept being given the runaround." In November, the couple went through their bank statement and were shocked to find their fees were running at $300 a year and rising. Just transferring money from one bank to another was costing $10 a pop. The Mortgage Choice broker consolidated their loans and signed the couple up with ANZ's equity manager loan, a line of credit loan where you decide your own repayments. The interest rate of 5.96 per cent is much lower, with an annual fee of $150 a year, 20 free withdrawals a month and no credit card fee "It's like one big bucket. That makes it manageable and we know how much we have. We have to be disciplined but we know that," Danielle says.

Case study

English as a second language teacher Geoff Hyde and wife Anny, who is a nanny, have saved $600 a week on their mortgage, not to mention time, by going to a broker. Even then their experience was mixed. They wanted to re-finance their GE Money loan, which had managed to resist tumbling interest rates. But because of the large amount ($810,000) they were hit by a lower loan valuation ratio (LVR), which is how much equity the banks will lend against, of 60 per cent. Normally it's 75 per cent to 80 per cent. Remember the calculation is based on the bank's value of the property, which may not be what you paid for it. While brokers were quick to find cheaper lenders, none would lend beyond about $740,000, although one would with a few adjustments, such as changing the name on the documents from his education-servicing company to his wife's, "but we wanted to stay above board", Geoff says. Smartline found seven or eight willing lenders and the Hydes picked Westpac, which offered a 45 basis point discounted variable rate of 5.11 per cent, almost 3 percentage points lower than they were paying. The bank also waived the application fee although they have to pay mortgage insurance because of the low LVR. "We've saved so much we'd still be happy even if rates jump," Geoff says, although he's considering a partial fix. "Westpac would let us mix 80 per cent fixed and 20 per cent variable so you can make extra payments," Geoff says. The loan also has offset and redraw facilities tied to a debit card, so the couple can save on credit card charges.

RATE RECKONER                           Rate    (Comparison rate)
BEST BASIC RATES
AMO Rate Saver Home Loan                        4.78%   (5.03%)
RAMS IO Maximiser                               4.84%   (5.05%)
Reduce Home Loans Basic Variable                4.84%   (5.07%)
BEST STANDARD VARIABLE RATES
State Custodians Standard Variable              4.79%   (4.90%)
Coastline Credit Union Minimiser Home Loan      4.96%   (5.05%)
QuickDirect Variable Loan                       5.00%   (5.00%)
BEST THREE YEAR FIXED RATE
ABS Building Society                    6.50%
Gateway Credit Union                    6.59%
AIMS Home Loans                                 6.60%
BEST PROFESSIONAL PACKAGE RATE
Community First Credit Union                    4.89%   (5.13%)
Heritage Building Society                       4.97%   (5.11%)
NSW Teachers Credit Union                       4.99%   (5.13%)