One of the key principles of successful investing is the importance of controlling the costs that you pay.

It's actually the one thing that you can control when you invest.

If you're investing into products such as managed funds and exchange traded funds, and even other types of investments such as a property, the lower your overall costs the more money you ultimately get to keep in your pocket.

Over time, the impact of costs will continue to compound and erode your longer-term returns.

For example, paying 1 per cent more in annual fees and costs could reduce your total investment return by up to 20 per cent over a 30-year period.

Responding to record-low interest rates

There's probably no other investment segment where it's easier to track how people are responding to ongoing costs than the residential property market.

Saving on home loan interest costs is one of the quickest ways to increase your ongoing disposable income, and it's clear more and more Australians with home mortgages are thinking that way.

Just-released Australian Bureau of Statistics data from July shows home borrowers are taking advantage of ultra-low interest rates and cutting their loan repayment costs in record numbers.

The ABS's seasonally adjusted data shows the value of external refinancing for total housing across Australia rose 6 per cent in July to reach an all-time monthly high of $17.2 billion.

External refinancing refers to existing borrowers who have switched from their current lender to another lender.

Refinancing of owner-occupied housing loans rose 4.9 per cent in July to $11.4 billion, while refinancing of investor loans increased by 8.3 per cent to around $5.9 billion.

The July total external refinancing figure compared with $16.2 billion in June and just under $15 billion in May.

The growing trend of mortgage refinancing, as shown in the chart below, is a sure sign that many Australian residential property borrowers are being proactive about reducing their costs.

On a property loan, what may seem to be only a small difference in the interest rate charge between one lender and another will really add up over a long period of time.

The increase in refinancing also shows that market competition between lenders is extremely fierce.

The value of refinancing between lenders is 60 per cent higher than a year ago, with many mortgage rates on offer for both variable and shorter-term fixed loans now sitting comfortably below 2 per cent per annum.

Data provided by financial comparison website Canstar shows that at 22 September there were 61 home loan providers in Australia offering interest rates below 2 per cent on more than 200 fixed and variable rate mortgage products. That compared with eight providers a year ago and just 18 products.

On a $500,000 owner occupier principal and interest loan taken over 25 years, a borrower can expect to pay $2,198 per month at the current average interest rate of 2.32 per cent.

Just reducing the interest rate to 2 per cent would cut repayments by $79 per month to $2,119.

At 1.85 per cent, the lowest advertised rates currently available, the saving would be more than $100 per month assuming the loan has no ongoing monthly costs.

That's around $1,200 per year in additional income to use elsewhere.

The discipline of cost control

In a nutshell, whether you're investing for retirement, paying off your home loan or just wanting to create more disposable income for other purposes, controlling what you're paying in costs should always be a key consideration.

Controlling costs shouldn't be a one-off exercise either.

As Vanguard's founder John C Bogle once said: "common sense tells us that performance comes and goes, but costs go on forever."

Smart Investing, Vanguard Australia