Pay off Mortgage Faster - Graeme Holm

R1ngSt1nger on 21/09/2023 - 16:46
Last edited 21/09/2023 - 16:47

I sat in a webinar the other night about how to pay off your mortgage faster. I don't usually do these things, but thought, why not?

Guts of it was:

  • Interest is calculated daily on your mortgage;
  • Offset accounts aren't "regulated" and are a higher cost in terms of interest rate, but mortgage accounts are regulated - he has had numerous clients who have requested an audit from their bank and received cashback due to their bank's error on the offset account;
  • Get an unlimited free redraw mortgage;
  • Deposit all forms of income into this account;
  • Redraw as required to pay living expenses, entertainment, bills, etc

Interest payable will be lower due to daily calculation, hence saving heaps of money on your mortgage and getting it paid off in 7-10 years instead of 30.

They have a specific product to cover the above (assuming there will be a fee associated), but to get access to the product, you need to sit a 2-day meeting at a cost of $1,000 where they go over everything with you and your personal financial situation, etc etc.

I did a super-quick calculation of my situation. If I put all my regular salary into the home loan account, I would be around $200 better off per year which certainly isn't going to give me the ability to pay off the mortgage in 10 years.

Since I sat in on this webinar, my Facebook is full of these 7-10 year mortgage things from countless brokers.

Seems too good to be true, so it probably is. Am I missing something as part of this strategy?

EDIT: Yes, I realise there are tax implications on redrawing from your PPOR loan if it turns into an investment down the track, this is out-of-scope for this discussion.

Financial Home Loan

Comments

  • GG57 on 21/09/2023 - 16:48
    +70

    The cynic in me suggests that I can pay my mortgage off quicker if I charge people $1,000 to tell them to put all their money into a unlimited free redraw mortgage, and I put all of those $1,000 payments into my own unlimited free redraw mortgage.

    • Gunnar on 21/09/2023 - 20:22
      +1

      Ohhh this is interesting. Please elaborate

    • SBOB on 21/09/2023 - 20:41
      +17

      Your ideas are intriguing to me, and I wish to subscribe to your newsletter….

    • HeWhoKnows on 22/09/2023 - 10:51

      This information is freely available almost anywhere.
      Even your bank can tell you this.

      Id put the $1000 into my mortgage

      As for Mortgage offset accounts, you need to look for a bank that offers a 100% Mortgage offset account.

      Some only offset the tint interest earnt on you savings account against the interest you pay on your mortgage (highway robbery) so be careful what you wish for.

      • drfuzzy on 23/09/2023 - 13:16
        +1

        the tint interest earnt? What is tint?

        • Jackson on 23/09/2023 - 17:42

          maybe tiny?

        • HeWhoKnows on 29/09/2023 - 11:57

          Its fat fingers on the keyboard
          Guilty as charged

  • CheapandUsed on 21/09/2023 - 16:57
    +18

    This is one of the better mortgage calculators around that lets you run offset scenarios https://figura.finance/calculators/repayments

    You can set an offset starting balance.
    Manually add in the 'extra transactions' section; your salary in, Loan payment out, monthly expenses out.

    This should generate a nice graph to show when the offset will equal your loan remaining balance, and how much interest saved.

    • autolux on 21/09/2023 - 17:48
      +1

      thanks… actually been looking for weeks for a calculator with fully customisable offset options ie. lets you customise the ongoing offset despoits/balance. kinda the whole point of them, but most are bare bones.

    • hydrox on 21/09/2023 - 20:23

      this is good. thanks mate

    • R1ngSt1nger on 22/09/2023 - 08:54

      Thank you, that’s an awesome calculator!

    • JH100 on 23/09/2023 - 16:02

      Does it include addressing the fact you are already paying more interest than you think? https://theconversation.com/why-youre-probably-paying-more-i…

      • leigh8904 on 24/09/2023 - 21:27
        +1

        Except, you are not. That article is rubbish.

        Mortgage interest is usually charged monthly, but the rates are yearly. This means that each time interest is charged, the outstanding amount compounds as interest is applied to interest.

        This is only true if you make no repayments. If you make standard principle + interest payments, or even interest-only, you are paying off the interest each month, and therefore compounding does not occur.

  • mbck on 21/09/2023 - 17:15

    Lmao. The specific product for 1k…pffftttt

  • dtc on 21/09/2023 - 17:17
    +2

    Obviously the concept of reducing the amount against which interest is charged (via offset, redraw, more frequent payments etc) is hardly ground breaking. You can also save on tax - if you have money invested and you earn $2000 in interest, you pay $700 in tax (or whatever your rate is) and net $1300 which you then put into the mortgage. If you put it into the offset, then you effectively 'earn' the mortgage rate and there is no tax payable (even if your earnings rate = mortgage rate, you are $700 ahead).

    I'm pretty sure you will save more than $200 pa; If you are only saving $200 per year, that suggests you are pretty much spending your entire income every month.

    Run your numbers through this calculator https://www.westpac.com.au/personal-banking/home-loans/calcu… or this one https://www.amp.com.au/home-loans/calculators/home-loan-repa… (or the one mentioned above)

    For example: if your mortgage is $250,000 @6% and you aim to repay that over 10 years, then by depositing $300 per month in an offset (starting at $0 balance) you save $11621 in interest (and you reduce your home loan by 4 months, albeit I assume you have paid over your entire offset balance to close out the loan). Or if you have an average offset balance of $10,000 over the life of the loan, you save $8,000 in interest

    How they cut it from 30 years to 10 years is presumably based on some generous assumptions

    That said, if your offset mortgage account has a higher interest rate than a vanilla no frills mortgage, it may be cheaper to take the lower interest rate and no offset.

    • gidxg03 on 21/09/2023 - 17:45

      This is good advice with the addition you don’t pay tax on the internet saved where as you would if you had the money in a savings account (paying tax on any interest).

      I thought the webinar would have been on debt recycling which is another method advertised to reduce the timeframe on paying off your mortgage but can be high risk from the research I did a few years ago.

    • trialex on 29/09/2023 - 20:01

      I interpreted it as the $200 "saving" was putting money in a redraw (and therefore have it counted daily) versus in an offset (and therefore have it counted monthly), NOT putting it into a redraw/offset versus nothing at all.

  • battler on 21/09/2023 - 17:32
    +4

    hence saving heaps of money on your mortgage and getting it paid off in 7-10 years instead of 30.

    yeah, nah
    marketing department at its best there

  • Some Human on 21/09/2023 - 17:34
    +19

    I have a simple method that has knocked years off my mortgage. It's called putting a couple of hundred extra on the loan every week.

    • brendanm on 21/09/2023 - 18:15
      +10

      You should sell this secret trick in an online webinar.

      • Minimum chips on 22/09/2023 - 18:20
        +4

        I would pay up to $1,001 for that seminar.

        • Brick Tamland on 23/09/2023 - 08:50

          Is there a way to pay this fee off quicker?

          • drfuzzy on 23/09/2023 - 13:17

            @Brick Tamland: put someone else's couple of hundred extra into the loan each week.

  • Dollar General on 21/09/2023 - 17:38
    +2

    Only way to pay it off quicker is to pay more each fortnight or month

    For $1K all they are telling you is to pay more and have no savings but to redraw if you do have unexpected bills

    • Slinky0111 on 21/09/2023 - 19:50
      +1

      Just by changing your payments to fortnightly over monthly cuts a year and a half off from memory

      • lgacb08 on 22/09/2023 - 07:40

        No, that's fallacy. OP already stated if he eyeballs his mortgage first thing in the morning and every hour until bedtime he'd save $200, that is $6000 over the lifetime of the loan which is at most 3 months of repayment. Sounds a lot but you can save even more by simply not buying a coffee once a week.

    • YesPleaseThankYou on 22/09/2023 - 10:12

      Clearly that is not the 'Only way to pay it off quicker'.

  • Drakesy on 21/09/2023 - 17:45
    +5

    Ngl, this isn't really anything new.

  • ihbh on 21/09/2023 - 17:47
    +2

    Seems too good to be true

    No it's not. Pay the $1k and lt us know how you go. /s

  • freefall101 on 21/09/2023 - 17:50
    +2

    I assume the $1,000 will run through basically a copy of the barefoot investor and go through your finances to find "savings".

    It's impossible to cut 20 years off the loan just via having your salary sit against your loan though, because it doesn't really accumulate very quickly. Let's say you pay $3k in repayments a month and earn $10k a month, spending the $7k. This means you average a $3.5k lower loan balance through the month. Compounded over 10 years at 6% interest that $3.5k will be worth about $6.4k. Congratulations, you've reduced your loan time from 30 years to 29 years, 11 months.

  • SBOB on 21/09/2023 - 17:58
    +1

    They have a specific product to cover the above

    Of course they do :)

  • deme on 21/09/2023 - 18:03

    Since I sat in on this webinar, my Facebook is full of these 7-10 year mortgage things from countless brokers.

    Seems too good to be true, so it probably is. Am I missing something as part of this strategy?

    See the first line.

  • KaTst3R on 21/09/2023 - 18:46
    +4

    The only real way of paying off the mortgage quicker is to earn more moolah. Dont bother thinking there is a quick and dirty way out of this. You will definitely end up spending more.

  • AndyC1 on 21/09/2023 - 19:08
    +1

    Did you figure out how the company makes money?

  • H3R34TH4C0MM3NTS on 21/09/2023 - 19:10
    +20

    Here's a tip to pay off a mortgage faster
    -buy a cheaper house
    -Make more money
    -Spend less money

    there saved you the time.

    pro tip

    IF you have family members you trust and you are responsible and have spare wads of cash, ask if you can hold their money in your offset.
    There is obviously opportunity cost if they help you but some people have a spare 30K not enough to do anything with but significant if you can get it to work for you

    • Tomhaigh1 on 05/10/2023 - 23:09

      best advice.

  • PissLUR on 21/09/2023 - 19:16

    Seems like common knowledge to me.

  • localhost on 21/09/2023 - 19:45

    I can tell you how to pay it faster… but will cost you money… said Nigerian prince.

  • sumyungguy on 21/09/2023 - 20:02

    Check the critical reviews of his book on Amazon. Personally I pivoted and decided not to pay mine off until I retire.

  • YRT on 21/09/2023 - 20:14

    I did. It was a <500k one, and parents chipped in probably ~200k, so I cleared ~250k + interest in 8 years or so on slightly below average salary. If parents didn't help likely it'd be 10 - 15 years.

    I regularly had <$1k in all bank accounts then, money was that tight; it wasn't unpleasant living, though I didn't splurge on luxury either.

    I don't see this happen on a $1m loan though considering tax bracket.

  • miwahni on 21/09/2023 - 20:58
    +3

    This is exactly how we were expected to push lines of credit, (think Portfolio loan for St.George, Viridian for CBA) back in the day when they were touted as the best thing ever. Just put your salary into the mortgage, use a credit card for all your regular spending and bills, then pay off the CC in full by due date each month. All of your surplus funds sit in the mortgage for longer, reducing the interest accrued.

    What this doesn't take into account is people's propensity to spend, eg if you see you have $1500 "available" then that weekend away on Fraser Island suddenly seems like a good idea…. also spent a lot of time rewriting these loans back into standard amortising loans for customers that couldn't manage their finances and spent every cent.

    Having said that, managed correctly, a line of credit - or the sort of loan with redraw being considered here - is a brilliant thing. I wouldn't say it would cut 20yrs off your loan term though.

    • sumyungguy on 21/09/2023 - 21:02
      +1

      I wholly agree. I had a CBA Viridian line-of-credit mortgage back in the day but a financial advisor reminded me there's a risk that it will never get paid off. So I split into a cocktail of conventional mortgage plus a modest line-of-credit (which of course I've never paid off).

      • miwahni on 23/09/2023 - 22:52
        +1

        I've paid mine off numerous times LOL. Get it down to zero, and then - buying a new car but wanting to sell the old one privately, and using the LOC until such time as the old car was sold (done that twice); I used it to help the kids avoid mortgage insurance when they had to settle on a purchase a few months before their sale was going through; spotted my brother in law when he needed surgery but his super fund was delaying the release of the funds he needed, etc. It's just good to know that it's there, like an emergency backup. And cheaper than a personal loan.

  • Typical16-bitEnjoyer on 21/09/2023 - 22:47
    +3

    you need to sit a 2-day meeting at a cost of $1,000 where they go over everything with you and your personal financial situation, etc etc.

    The only thing missed as well, is they want a nice good look at your financial situation to see what equity you have before pitching a property or "investment" to you ;)

  • SlickMick on 22/09/2023 - 08:35

    Without an offset account, you need a pile of cash outside the mortgage for living expenses, which isn't paying off your loan.
    Now that offsets are more affordable, I find it hard to believe they aren't the best solution. (Back in the day you had to pay these kinds of fees to get an offset account.)

    What's this about the interest offset not being calculated correctly??? (It doesn't seem like complicated maths??) I don't see any way that not getting interest offset on a pile of cash could be better than these calculation inaccuracies with an offset account.

    • R1ngSt1nger on 22/09/2023 - 08:53
      -1

      I’m not 100% sure, he mentioned something about banks not linking the offset to the mortgage account as one problem.

      The other problem was that the banks were (somehow) not making correct calculations on the offset amount and weren’t reducing the interest enough. He advised his clients to contact their bank to perform an audit, and reckons almost always the bank deposited additional funds into their account as they stuffed up.
      The additional amount wasn’t substantial, maybe couple of hundred dollars here and there. He showed an actual letter from ANZ with his client details blanked out.

      Then based the above two factors as why people shouldn’t use offset accounts, as the bank may set them up incorrectly, whereas with mortgage accounts are always calculated correctly or something along those lines.

      • SlickMick on 22/09/2023 - 09:31
        +2

        No one disagrees with using all your money to pay off your loan, except this guy says "except keep some out for expenses". The whole reason that offset accounts were invented was to avoid this.

        Back in the day, offset accounts were only available from sharks like this guy. I did exactly what he's recommending because I was too cheap to pay for an offset account. But the maths was clear - offset accounts were worth paying extra for.

        Now that offsets are affordable, I'd like to see the maths from anyone who things they can beat them. No way anyone will recover their $1000 from this guy.

        As for "the bank forgets to link the offset account". Umm I think you would notice that!!?? He calls banks wa*kers. okay.

      • localhost on 22/09/2023 - 19:43

        And he knows better, right? How to calculate your money and you will pay him $1000 for that?

        Well, it's your money…

  • wannagrababargain on 22/09/2023 - 08:39
    +4

    Unlimited free redraw with no fees and decent interest, there I saved you $1000 - https://www.unloan.com.au/switch-to-unloan-calculator-invest

    Seems to be spruiking redraw over offset but really the only saving between two is the usual ~250-350 / yr fee associated with an offset package. This won't cut years off your mortgage. For some, the way the offset facility works is worth that extra $250.

    Not sure what he means by the blanket statement "offset accounts are not regulated." A few years ago there were online only lenders offering fake offset accounts, basically a free redraw account that is shown to the customer as an offset, they were not regulated for financial compensation because they were not set up as a bank deposit account.

  • R1ngSt1nger on 22/09/2023 - 08:58
    +1

    Thanks everyone.

    From what I can gather, the redraw vs. offset plays a small part.

    I’m tipping it’s going to be all about getting an investment and putting the profit on your PPOR.

    I dunno, I’m not paying the $1k to find out.
    He does offer money back guarantee if (on paper) they can’t find you at least $25k of savings. But it’s pretty easy to do that on paper.

  • Chewy2221 on 22/09/2023 - 11:10
    +1

    There are lots of "gurus" who will tell you all sorts of things on how to save/make money. Many of them involve paying for "training courses". Most of these schemes are not worth the outlay. If you really want to pay off your mortgage sooner, then making weekly or fortnightly repayments (rather than monthly) does make a significant difference. Your current lender would probably help you set this up.
    Good luck

  • JIMB0 on 22/09/2023 - 13:08

    You can also avoid a mortgage entirely by saving up and paying cash. Bonus savings to be had if you find a motivated vendor who will accept less for cash.

    • Neoika on 23/09/2023 - 06:31
      +1

      Yes, a cash only tradie spotted here.

      • JIMB0 on 23/09/2023 - 10:49
        +1

        I've only ever worked for a company and received taxed wages. It pays better and is less trouble than cash jobs.

  • gar519 on 22/09/2023 - 13:17
    +1

    This Sydney Morning Herald article sheds some light re Graeme Holm and The Infinity Group.
    https://www.smh.com.au/national/sharks-and-snark-circle-infi…

    • Kangal on 23/09/2023 - 07:20
      +2

      Even the likes of Westpac are calling him shady….

  • huwcar on 22/09/2023 - 18:15
    -1

    To save you 2 days, and $1000, the HSBC Home Value Loan fits this description exactly. I moved to this one 6 months ago from an ING loan with associated offset account.

    If you want the contact details of the mortgage broker who set it up for me feel free to message me. He won't charge you anything either, brokers make their money from the banks and shouldn't charge customers.

    • kl2999 on 22/09/2023 - 18:55

      Don't bother, just deal with the bank directly.

      • huwcar on 22/09/2023 - 21:37
        +1

        Why would i waste time doing things like wait on hold when someone else could do it for me though?

  • SuperGreen on 22/09/2023 - 18:28

    For another $1000 I can give you some more advice to pay off your mortgage even quicker. Will only take 5 minutes, meet behind the bottle-o around 11pm.

  • LendingWorkshop on 22/09/2023 - 19:35
    +1

    And here I am paying people(sharing commission as broker cashback) and giving advice(just a phone call away) instead of asking $1,000.

    Ironically most of the customers I have from Ozbargain are either too savvy financially or bankers themself.

    Agree with people not managing offsets wisely, could be the case but can't imagine bank systems messing up offset calculations more often than not. Having worked in a bank for almost 10 years.

  • whyisave on 23/09/2023 - 03:41
    -2

    This is how I understand it:

    Offset money is your money.
    So, if bank collapses, you lose your money.

    Redraw money is bank's money.
    So, if bank collapses, government is supposed to step in & help you out.
    (Also, dipping into redraw money, counts as 'little loans' that you're taking out )

    • tomleonhart on 23/09/2023 - 06:19
      +6

      You understand it wrong. Offset account is just another normal bank account which is covered by the government up to 250k.

      • ribze1 on 23/09/2023 - 08:41
        +3

        Correct.

        And to further debunk, the bank has the right to lock up any money available for redraw as "it's their money". Banks can't touch money in an offset as it's "your money".

        • whyisave on 23/09/2023 - 21:50

          Thanks for that.

          • SlickMick on 24/09/2023 - 10:24
            +1

            @whyisave: The downvotes were a bit harsh. I've heard the same thing, and I heard it here!

            I finally decided to check for myself. Here's what I found: The APRA lists institutions covered by the FCS ($250K guarantee). It includes Indue (which holds the offset accounts for loans.com.au). My Homestar offset uses an ANZ BSB (branch = Origin).

            I read that it isn't legal to take deposits unless you're an ADI, so the online lenders seem to use ADIs to hold your money, which is therefore guaranteed. I don't know whether all do. Does Athena?? Apparently some (maybe not anymore??) use a subaccount of the loan as if it were an offset, but are really just allowing truly unlimited withdrawals from the loan. In this case, you never have a positive balance so there is nothing to guarantee or risk losing.

            The fearmongering was that if an online lender went broke, your offset account would be an asset for creditors, and your loan would be sold so you'd be hurting real bad. My conclusion is that it was never true, but you might have heard the same story that I did.

  • Smol Cat on 23/09/2023 - 04:22
    +1

    What is this about people saying that some offsets aren’t proper full off sets? Surely my ANZ offset account offsets the full amount? They’re such a big bank. Is there a chance they’ve done somthinf dodgy? How does one find out?

    • R1ngSt1nger on 23/09/2023 - 06:45

      Wouldn’t mind knowing myself.

    • gromit on 23/09/2023 - 07:26
      +2

      some basic math should give you a good indication. I calculate mine out every few months just to double check, but have yet to have an issue with offset.

    • d4w17dch17d2 on 23/09/2023 - 08:54

      some home loan products have a $ limit on how much you can offset… ie $30k max so you cannot fully offset the mortgage if you had $500k left in the mortgage and $500k in cash it will only be offsetting $30k against the home loan.

  • d4w17dch17d2 on 23/09/2023 - 08:52
    +1

    7-10 years assumes you're going to pay everything in your offset or redraw account into the mortgage. So essentially have a house paid off at the end of the 7-10 years but have no cash reserves. Its the depositing of all your income and just withdrawing the expenses that accelerates it looking at the calculator. Essentially paying way more than the monthly minimum. The more you have in offset / redraw the higher portion of your monthly payments go against the principal instead of just paying off the interest.

    • Neoika on 23/09/2023 - 09:02

      In other words, check if you have any cash sitting around and doing nothing towards mortgage.

  • DingoBilly on 23/09/2023 - 10:10

    This is just someone marketing themselves with bullshit so you pay for their future seminars.

    There's nothing magical about paying off mortgage earlier.
    - Save more money/get a better job/pay it into mortgage
    - Pay more frequently (weekly instead of monthly)
    - Refinance every year or two to get better rates/get refinance cashback
    - Get an offset when it makes sense to (i.e., if rate is 0.1% higher but you have $200k, any additional costs should be covered by your savings although depends on your total loan)
    - Avoid using redraw for investment properties where you are paying additional due to tax implications

    That's about it from the top of my head. And that will largely reduce the years by say up to 5 years. Almost impossible to cut it from 30 to 5/10 unless your salary/savings increase substantially.

  • pn09 on 23/09/2023 - 11:58
    +1

    I'm with CBA and don't have additional charges or higher interest rates to have offset accounts.

    We have a number of offset accounts - one with a lower amount which is transactional and another which has more money we've saved. Free to move around.

    Pay goes into transactional offset.

    Pay CC off every month.

    In the last couple of years we're being more careful with family spend - cooking more at home, less eating out, less fast food - better for our health and our wallets

    Still making time for fun and spending on things and experiences which we want

    Taking responsibility for our discretionary spend - i.e. enjoying now vs. lowering mortgage - the balance of this (enjoy now vs pay less overall) equation is different for everyone and is up to each of us as long as we take responsibility for our decisions.

  • trapper on 23/09/2023 - 12:07

    Interest payable will be lower due to daily calculation, hence saving heaps of money on your mortgage and getting it paid off in 7-10 years instead of 30.

    lol

  • TightAssDude on 23/09/2023 - 13:22

    We stopped using redraw with 'Unloan' becuase they were using our redraw to pay interest. At the time, the cash was needed for a holiday we had been saving for, so just be aware of how your financial institution uses the redraw.

    • bashar20 on 23/09/2023 - 18:31

      What do you mean?

  • Cluster on 23/09/2023 - 14:35

    I bet this was sold as a 'super secret hack' that 'they' don't want you to know about.

    Secondly, I bet the promoter offered to reveal more secret strategies, but you had better take out your credit card to find out.

  • Dack Smith on 23/09/2023 - 15:34
    +1

    You didn’t pay for this ‘seminar’ did you?

    Bad mistake

    • WhyAmICommenting on 23/09/2023 - 20:27

      Nah, they suck people in with free seminars and a few biscuits and make-it-yourself coffee.

      Had a guy tell us he finds cash flow positive investment properties. Bit later that was for people “with more to invest than us”.

      Also tried to tell us to buy an investment unit in Brisbane city. We bought a house in the burbs and have done a lot better (capital gain), don’t have to rent anymore etc etc.

  • tooblue on 29/09/2023 - 20:08
    +1

    The drawback of the offset account is that when applying for payment through Centrelink, the balance on offset is counted as assets while money in redraw is not.

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