What is holding you back from financial success?

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. It's Jessie and I'm joined by Scott, Harry. Hey, mate.

Hey. Hey. Let's dive into this. Today we're talking about why people just struggling to pay their houses off before retirement. So the data coming out is more than six in 10 Australians are retiring with a mortgage. And what that means is they have to use their super fund to pay off the house. And what that means is they cannibalise their retirement nest egg and as a result, their lifestyle is decimated in retirement. That means their super runs out faster and then they're under the pension. Now, the pension is only just over 6,700dol per week. Now, we all know what the cost of living is. If you're existing on 6, $700 per week, you're not traveling, you're not doing much fun, you're not experiencing too much, you're literally existing. And so the biggest hurdle to people's financial progress and retiring early is their home loan is their mortgage repayment. And so we're just going to run through some reasons why Australians but hitting retirement with a mortgage deal.

Yes, absolutely. And I'm going to start with a very interesting stat. It blew my mind when we saw it this morning. The most profitable companies in Australia as of January 2025, based on the 2024 income, is the third most profitable CBA, the fifth Westpac, the sixth NAB, and the seventh AMZ. CBA made $5.8 billion in profit last year. And how do they make that profit?

Interest on people's home loans, interest on people's credit cards, getting your money for free and relending it back out at 6%, 16%, whatever it may be.

Absolutely. The banks aren't there to help you. The banks are there to make money for their shareholders. What they do is never in your best interest that they, that home loans are structured, they're designed to make the banks insane amounts of profit. They're not there to get you debt free before retirement. So talk to me about how banks make money again, that. That structure and how it's not working for them.

Sure. So where it sits is banks design loans to keep people in debt. The problem with that is everyone wants to be out of debt. And so that's very similar to you going to McDonald's and asking for nutrition advice. Don't want you to be fit and healthy, they just want you to eat more. McDonald's and banks don't want you to be out of debt. They just want you to keep paying interest. And so the best, let's call it, myth is that interest rate matters. Now, what this does for banks and brokers is gives them an excellent opportunity every three years on average to refinance you to find a cheaper rate. And you have, up until right now, thought that that is actually the smartest thing to do financially. Get the cheapest rate possible, save the most amount of interest. I am a smart, financially savvy person. I'm here to tell you, unfortunately, you're taking advice from the wrong people. These banks and brokers use interest rates like fishermen use burley, where you put a little cheap rate in the water and all of a sudden you have a treasure trove of people lining up the door to try and refinance to a cheaper rate. What they don't ever do, the banks and brokers, is actually keep your loan term the same. They will always reset it back to the start of another 30 marathon. And one thing I know is if you're trying to finish a 30 kilometer marathon and you keep going back to the start line every 3km, so that whole rate myth is irrelevant. I just want to sort of prove that again, is you think the cheapest rate is the cheapest loan. That's not correct. The cheapest rate simply means you're paying a little bit less interest over a longer period of time. You refinance after three years, back to the start, another 30 year loan that's now a 33 year loan. Like you're three years in, but you've just gone back to 30. So three plus 30, 33 year loan.

Like any benefit you would have gotten from that lower interest rate.

Yeah, the cheapest loan is the one with the shortest term. And so you're consistently trying to find cheaper rates, thinking that that's going to move the needle. And you've been doing that for decades and it hasn't moved the needle, but you keep doing it because you keep getting told the cheapest rate is the cheapest loan. And so the people telling you this have a financial incentive to keep you in debt for as long as possible. The best way to keep you in debt is to keep you going back to the start line. And so that's where everyone's going wrong, is they're trying to find the cheapest rate, thinking that's them asking for the cheapest loan. And I just want to preface, this is not your fault, by the way. You're never taught this in school or high school or anywhere. And so you just are going with the flow of what your parents did. And as a result of that, what your friends are doing. And so it's not your fault, but it is your problem. And as a result of that, you're going to be frustrated with your lack of progress paying 10 grand a year off your mortgage like the average Australian, and then thinking, this is not working, let's find a cheaper rate that'll move everything. During COVID we had clients at 1.99% and they did not pay their houses off even though the rates were 1.9%. I just had a crazy case study this week. Really good clients of mine, 90 days in, they were on a fixed rate of 1.99%. Before they met me, the fixed rate finished and then they said, hey, we'll look at some auctions. We, we then obviously set up the homeownership plan in the first 90 days. So their rate at 1.99%. With ANZ, they paid off $5,000 in 90 days. 20,000 per year. Not bad. The average train's doing 10. However, on our home ownership plan, same income, same loan amount rate of 7%, not 1.997%. They paid off 7, $5,000 in the same period time instead of 5,000. That's 30,000 a year in debt reduction compared to $20,000. And so that is just the ultimate example. That rate is irrelevant. How can a guy at 7% on the same income and the same loan amount beat a guy on 1.99%? And that's like, these are the numbers, these are the facts, these are the stats. So the client was, oh, my God, they just insane. So that's where people are going wrong. Refinancing for a cheaper rate every three years, trying to find something that's going to move the needle. The second way people are sort of struggling is because they've been told offset accounts are the miracle cure.

Yeah.

So offset accounts offset interest, which is really cute. They don't reduce principal, which is the only way to own your home. And so we've obviously got all the data here. We've got Anz offset account calculator. And if you have a $500,000 loan and you have 50,000 cash sitting in your offset account from day one, from day one, 50 grand, you never touch it. It's only going to knock you loan down by five or so years. So you've gone from 30 years to 25 years and you've got 50g in the account from day one, which I haven't seen too many.

That's the biggest issue is this direct access to all of this money sitting in an offset account where you've got a Visa debit card attached to it. You tap and go, you're unconsciously spending. And as we all know, we spend what we have access to. If I've got $50,000 sitting in a, in a bank account, I'm sitting there going, yeah, maybe I do need, want to renovate the bathroom and maybe I do want to put a pool in. Maybe we do deserve a big family holiday to Japan for 20 grand. Like you start thinking what do I want instead of what do I need? It just changes the psychology of your spending.

And structurally, the reason why the offset account doesn't work for most Australians is they don't hold the loan for 15 years because everyone's loan loan is front end loaded with interest. What does that mean? The bank gets majority of their interest upfront first 15 years. Once they've received all the interest from you, then they let you start paying down your principal. Now with an offset account, it doesn't really, really start moving in terms of, as a comparison to a normal loan until about the 15 year mark is when it starts to get legs and start to really sort of have a difference. Now I've just told you that no one is holding their loan for 15 years. They're refinancing every three. So they're not even giving their offset account a chance to get some momentum and start moving. And so that's another factor. You just offset accounts think like they're doing these weird and wonderful things, but you look at how much principal you've paid down, you've got an office account right now look at your loan balance, how much they come down over 12 months. I can assure you it's nowhere near our client's average, which is 30,000 a year.

Yeah.

I think by the cheap rate you've tried the opposite account. Now you might get super funky and say I should maybe pay more frequently. So let's say you pay weekly or pay fortnightly.

Yeah.

You might get an extra payment in every few months and it may take a 30 loan down to 25 years again. But once again we're just saving five years. Our clients are sorting out their mortgages and are living debt free lives on average after 12, they're free from mortgage prison after 12 years, not 25 years. And so that means that there's an extra 13 years of all their income to do whatever they Want, wherever they want, with whoever they want. And that there is really powerful.

And I'll add one more there. I think the biggest scam that the banks, how they swindle us, is that they use our money to make money. They tell you bank all your income into a savings account, then make your monthly repayment from there. What they don't tell you is all of that money that's sitting there, they are then on lending to all of their credit card, car loan, personal loan, other home loan clients, customers at a much inflated interest rate. So how much, Scott, do you get paid in a traditional savings account?

Well, it's pretty whopping. I hope everyone's sitting down. Put your seatbelt on. This is a huge figure. The banks pay interest on money sitting in transactional account, like your check or savings account that you've got right now, your visa debit account. 0.001%, not 1%, not 0.1%. 10% of 0.1% is what you get paid for money seeing transactional account. And like Jess said, it doesn't sit there. It doesn't wait for you patiently to come to the ATM and grab it. As soon as it hits the account, the bank on lends it to other customers at 16%. Now, how does a bank make $10 billion a year in profit? You get money for free and you re lend it out at 16%. That is the greatest business model in the world.

And we're, and we're, you know, the unfortunate, you know, naive players in that whole system. So how, how do we start getting our money working for us instead of working for the bank?

Very, very good question. Number one is you needed to actually get your income from working for you on a daily basis. So banks charge interest daily. And so every night the bank takes a photo of your loan balance and you need to have that income of yours actually sitting off that loan balance every single night. Step one, step two, separating your income from your living expenses. Pivotal. It's just insane how we're sort of programmed just to spend what we earn. The average Australian is saving less than 1% of their income. So that means they earn $1,000, for example, they save less than $10 of the thousand. Our client's average savings rate is closer to 18%, which means they save $180 of the thousand, not 10. Same income, same loan amount. Better structure and a plan, and no doubt the accountability and the tools to track and measure everything are critical. So that's where I think if anyone was to sort of narrow it Down. So what am I missing? A. A plan. You don't have a plan.

Yeah.

That means you're on a bank's plan. It's not a great deal for you, the bank's plan. So you don't have a plan. Another thing missing for most Australians is they don't have the right structure that their incomes will open or the right strategy on how to pay down at principal at an accelerated rate and a cash flow management system. And they don't have any tools to track or measure anything. They don't know their surplus cash flow, they don't know what day they pay the house off. They don't know the savings rate. They just don't know their numbers. And so if you're trying to lose weight, you need a set of scales. No, Australians got a set of scales. They're just hoping to lose weight one day. So I think the gaps where We've seen over 23 years of doing this and over six and a half thousand Australians and learning from them and what they're not doing right, that's probably what we can sort of narrow it down to, that you focus on those things, which is our whole system, like, that's all we do at Crown is on this homeownership plan. We put everything we just talked. Talked about into place and implement it for people. You put all that into place, you're going to be at least half a chance to pay your mortgage off before you retire.

Fantastic. That's awesome. Thank you so much, Scott, for all that.

Thank you, Jessica.

We hope that that's been enlightening for some people and yeah, of course. Always reach out to us at any time. We're here to help and answer any questions that you have. So thank you again, Scott.

Take care. Bye.