Don't be distracted by rate!

Foreign.

Money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money Podcast. I'm Jessie Edge and I'm joined by Scott Parry. How you going?

Oh, couldn't be better, Jess. Could not be bigger. Looking forward to. Yeah. Having a quick chat with you guys today about interest rates and just don't think that's what you think it is. And what I mean by that is I, over the 23 years, sitting with thousands of Australians and looking at their financial position, I think everyone's fallen into the trap that the banks have set for us, which is chasing the cheapest rate.

Absolutely. Because they say because it's. That's the easiest thing to sell, isn't it? Literally a comparison of interest rate. And that's it. It's the easiest thing for your. For us to compute and to understand and go, oh, well, if that one's slightly less than the other one, it must be better. But it's not the case, is it?

No, I mean, you gotta take a step back and go, okay, banks, do they want to do what's best for you or do they want to do what's best for them? Do they want you in debt or out of debt? And like, I just see rate as a marketing play, a genius one at that. And so they've set this trap for Australians to think, if I ask for the cheapest rate or if I get the cheapest rate, that's me getting the cheapest loan. And I'm sure you, right here, right now, believe in that because that's all you've been told and it's not your fault, but it is your problem when that comes down to it is you've been marketed to about rate being the most important factor when it's not. Because I've got clients who've had a rate of 1.99% and then on our system paid off more than what they did at 1.9%. And if rate was that important, then everyone during COVID who had a rate of 1.99% or 2% or 3% would've paid the house off.

Yeah.

But no one did. And so I feel there's a lot of the banks don't, you know, and a lot of the sort of marketing around rate allows them and brokers, mind you, to be able to reset your loan to them every time you find a cheaper rate. And they disguise it by showing you, oh, you're going to have a low repayment in your mind. That's a cheaper loan. Wrong. You had 27 years left on your loan, you found a cheaper rate and you decide to refinance back to the start of another 30 year loan to get the cheaper rate. You now have a 33 year loan because you're already three years in now you've had that three years onto the 30. That is more expensive than what you are currently on and it's more expensive than a higher rate loan over a 15 year term. And so rate isn't what you think it is. You've been looking at the wrong number. The most important number you should be looking at is how much principal am I paying my loan down by every single year? What is my loan term? Because I can assure you, when a client of mine pays off the house every 28 days, the reason for that is because they're not refinancing back to 30 years every three years to find a cheaper rate. And if they stay the course, they pay the house off on average in 12 years with us, which is amazing. But everyone out there in Australia is feeling that getting a cheaper rate is getting a cheaper loan. But in actual fact, they're just being in debt for longer, which is more expensive. And so you need to look at the total interest cost of that loan, not the rate. You're looking at the wrong number. Deliberately being told to look at the wrong number. You see the total interest costs in your loan documents in that big encyclopedia that the bank makes you sign just before settlement. And the total interest costs will be hidden in there. And it's always double what you borrow. Yeah, you borrow 600,000, you, total interest costs is another 600,000, Total loan cost 1.2 million, you pay back double what you borrow. But it's actually more than that because that's if you kept the one loan for 30 years, but you're refinancing every three years to find a cheaper rate, so you're paying back way more than double. And the amount of clients I see who are more on their house than when they originally first bought it loaths people.

Yeah, it's crazy, isn't it? And I think people forget that the banks are very, very smart and they know how to make a lot of money off us. And they will front end load the interest in the structure of your P and I loan. And so the bulk of the interest that you pay will be at the Beginning, the first 15 years of your loan. I love it when you refinance every few years. Like when you look at actually the principal Portion of your principal, interest repayment. It is so small in those first few years. And that's where paying that down as quickly as you can, you're paying less interest and more is going towards your principal and all of that. You just, you need to beat the bank at their own game.

Very difficult to do because These guys make 10,000 million dollars a year in profit after all their expenses. That's 10, that's just one bank, that's just CBA. 10 billion dollars a year. So you've got every loophole covered. Like this is no accident. And so you're sitting there thinking the banks are trying to help you by giving you a cheaper rate. An actual fact you're just getting a more expensive mortgage disguised with a lower repayment. Yeah, so the front end loading loan, as Jess was saying, is critical. Like you're not paying much principal. After the first 15 years. The average Australian is only paying close to a thousand dollars a month off their loan. They're paying 4,000amonth in repayments. And so you're paying 10, 12,000 a year off your loan. And you look at your loan balance like well at 500 grand. Well next year, guess what, I'm down at 488. And you're after that, I'm at 476. It doesn't move much. And then you refine us back to 30 years and you start that whole marathon again. And one thing I do know is if you're trying to run and finish a 30 kilometer marathon and you keep going back to the start line every 3km, not finishing the marathon, and that's why 60% of Australians are retiring with a mortgage, because they've been chasing rate the whole time. And you're chasing rate right now. You guys out there are chasing rate right now. You've chased rate ever since you got your loan. Your broker gets paid every single time you chase the rate. The bank resets the clock every single time you chase the rate. Everybody makes more money when you chase rate except you. But you think that you're the winner. That's the beautiful part about the marketing is you think you've got the better deal. You think you've beaten them, you think you got the win. So sometimes it's not what it seems. But you've never been taught this in school or high school, university. No one's teaching you this. This is what I'm saying. It's not your fault. You've never been taught this because no one has a vested interested interest. Yeah, nobody, like nobody makes money when you're debt free, except you. And so banks aren't there for you. As much as you may think that they're trying to help you out, their profit figures show differently.

Absolutely.

So that is. That is just something. Some food for thought. I know it's just flipped your world upside down. I know it's like, no, but how come everyone's not doing this then? Because no one makes money when you're out of debt. And the people who are telling you have a vested interest to keep you in debt, which is exactly the same as you going to McDonald's and asking them for nutrition advice. McDonald's don't want you fit and healthy, they just want you eating more. McDonald's. The banks don't want you out of debt. They just want you paying more interest. This is the game and it's the problem. And so that's been our crusade. Jess and I, for 23 years, are trying to educate Australians. Say, hey, what you're doing is not working. You're very aware of that. That's why you're frustrated. Your loan's not moving. You're just throwing the kitchen sink at it. All of a sudden, you change the strategy. You do the exact opposite to what they're telling you to do, and you get the exact opposite result. Which is why our clients pay 200% more of their loan in the first 12 months with the same income and the same loan amount as what they had before they met US accident, 23 years worth. So that I know sound a little passionate.

You are very passionate about it.

But I just. I know what happens to your life once you don't have a mortgage repayment. I see it every 28 days. A client and the sparkle in their eyes when they've got a 4,000 or a month pay rise net, because their mortgage payment is no longer going to the bank. It's sitting in their hot little hand where it belongs.

Game changer.

Yeah, like when people zig, maybe it's time to zag. If you do the exact same as everyone else out there, you're going to get the exact same result. And most Australians are pretty broke. They. They're saving less than 1% of their income every pay. What does that mean? Well, if you're earning $1,000 a week, the average Australian is saving less than $10 out of the thousand. Our average client is saving $180 out of the thousand. So food for thought. Choose your own adventure. I've only got 23 years of data.

Love it. Thank you. So much for sharing that. Scott. Hello, Jess.

Thank you so much for allowing the platform for our listeners out there to just move forward financially, like that's what we're about. How can we help you move forward financially? Because no one else is trying.

All right. Thanks, Scott. Thank you so much. Love to see your passion and thank you so much for sharing your wisdom and looking forward to hearing what you have for us next time.