Season 3 Episode 6: How to optimise your home loan
IN THIS EPISODE
Mel and Darlene dive into the incredibly powerful topic of optimising your home loan. Whether you’re a seasoned mortgage holder or just trying to figure out what “offset” actually means, this episode is unmissable. With over 50 years of finance experience between them, Mel and Darlene unpack practical strategies to help you save thousands and shave years off your home loan, all while keeping it real, relatable, and even a little bit funny.
Think refinancing is the only way to save money on your mortgage? Think again. Mel and Darlene walk through the top methods to reduce your loan term, including paying more than the minimum, reviewing your rate regularly, and understanding the surprisingly big impact of small extra repayments. They also cover how to spot bank tricks, get proactive with your budgeting, and take back control from the lender.
At the heart of the episode is one big question: What would life look like without a home loan? Hear how even modest changes to your repayment strategy today could mean freedom, flexibility, and lifestyle choices tomorrow.
GO FURTHER
To check the amortization schedule on your home loan and see what is still owing at any point in time, enter your details in our calculator here and see your details in the ‘Loan amortisation table’ tab: https://www.themoneycollective.com.au/repayment
Interest rates have reduced since our recording of this episode. To check the RBA rate currently, see it here: https://www.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker
To discuss your home loan and repayments, book a time with us.
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Welcome to The Money Collective podcast. We're here to uplift your financial wellbeing. Your hosts are me, Mel Pearce and Darlene Neu. We are the co-founders of The Money Collective and together we have over 50 years of finance and banking experience. We provide the tools, information and guidance to better understand your money and feel confident making money decisions.
0:21
We are here for another episode of uplifting your financial wellbeing with the Money Collective.
0:27
That is us.
0:29
OK, let's start with a truth.
0:31
Today my truth is planning for a holiday.
0:37
So I've learnt so much from listening to Mel's planning that I feel I've really see she said a high bar, right?
0:44
So I'm like getting a little nervous that I need to really get started.
0:49
So can't wait to see your spreadsheet.
0:51
Maybe I'll need to copy yours.
0:55
So back in COVID times, my daughter Lily said to us, Mum, I really want to go to Europe.
1:03
And I suppose that was a bit heightened because we were locked in our houses.
1:06
So and I said to her, yes, we'll do it in grade 8.
1:11
OK.
1:12
It wasn't even a maybe it was Yep, we're going to do that when you're in grade 8.
1:15
That's a good time.
1:17
Now, I probably just plucked that out of my backside, but there was, look, some rational thought in there that, you know, grade 8's a good age.
1:26
You know, people worry about taking kids out of school, you know, and I think, you know, grade 8's not too bad.
1:32
And what, like the life stuff?
1:34
They're going to see and learn so much better than what you're going to learn at school anyway.
1:37
So I am thinking that we're going to take a holiday to Europe for six weeks.
1:43
Cool.
1:44
So that means out of the business, which is scary in itself.
1:49
I'll be, although I I won't be more than fine.
1:52
No, no, I'm not worried about that.
1:53
Actually more than fine.
1:56
But you know, there's always a lot of, you know, stuff to do So it means mill's got to carry more of the load, but also I've got to do the budget.
2:05
I haven't even started yet.
2:07
I don't know what it's going to cost.
2:08
That makes me really nervous because I don't know whatever you think times 2.
2:14
And I want it to be a really good trip.
2:19
You know, my money personality is risk taker saver, right?
2:24
But sometimes what can happen is I can trade off quality time now and I work a lot and sometimes, you know, I have guilt around not being there for kids and stuff like that.
2:36
So I really want to be in the moment, enjoy that holiday, spend time with Lily.
2:45
And I've got 23 year old son Logan.
2:48
I've talked about many times how could I go without him And obviously Dennis, my husband.
2:52
So we've invited him to go too.
2:55
Yeah, that's good.
2:58
So it's the four of us.
2:59
So it's our whole family, like our family unit going to Europe.
3:03
And Logan said, well, if you're paying on there.
3:05
So I didn't know how he whether he'd been or not, but I, yeah, I really want him there for me because I can create these memories.
3:12
I've got this vision of all the memories we can create.
3:16
So definitely all in.
3:18
Now I'm up to doing the costing of it and I haven't started.
3:22
My theory is it might need six months planning.
3:27
Is that right?
3:27
Do you reckon I need to start earlier?
3:29
No, no, no.
3:31
You've got this.
3:31
Yeah, got this, got this.
3:33
Look, we do have savings and some money we can draw on, but I I'm like, so you've already got like a a plan and like how much money you roughly wanna spend and then, then you've gotta figure out what you can do with that, how far it's gonna stretch.
3:47
So it's all the planning.
3:48
So, yeah, so I know that's not, you know, much detail in the truth, but yeah, planning for a holiday, I need to really start now, understand what it's going to cost, what that's going to do to our goals, where it's coming from because, yeah, you know, it's a trade off, but it's a trade off.
4:07
I really want to spend and spend some time building quality memories, like knowing how much it's going to cost, setting that money aside, and then looking at the future, like that's really what it is like, hmm, that's cool.
4:17
That money's gone.
4:18
And then the future planning after that, I feel like that's the main.
4:22
I think that's the future planning, actually.
4:24
That is key.
4:25
Actually, in this situation, you won't have a number.
4:27
I don't know how much it's gonna cost you.
4:28
50 or 6?
4:29
I'm saying 50.
4:31
Off the top of my head, no research done yet.
4:33
I've said a number in my mind of 50K, but I've got no clue.
4:37
Yeah, I hope it's so.
4:39
But then like exactly like you said, what dip does that make and what difference does that, you know, that compounding impact make in other places?
4:48
So that's what I really want to know.
4:51
Once that money comes out, what does that future look like?
4:54
Well, I can't wait to hear what that sounds like.
4:56
Yes, because what is in the future at the moment that you think off the top of your head is going to be impacted not too much long, What comes to mind?
5:11
Yeah, that's a really good question.
5:13
It would be just money for lifestyle in future years because my goal, and I don't know whether I've shared this before, is paying off debt.
5:22
So I am trying to get debt free.
5:25
Not debt's got its place, people.
5:27
But for me, I am just really trying to get debt free.
5:31
So what does it mean?
5:32
It means that I'm not as debt free as I hope, I guess.
5:36
But you've got other methods around that because you're selling some properties.
5:39
Yes.
5:39
So all that.
5:40
That's right.
5:41
So I've got some pieces coming together.
5:43
I need to put them together.
5:46
Do you think once you look at it and you go right, well, there's my plan and my strategy selling, spending the 50,000 is actually very worthwhile.
5:54
It's not really going to impact life too much.
5:57
Yeah or yes.
6:02
I well, it's the opportunity cost loss exactly of not doing it.
6:07
No, of because I need to like by doing this means that, you know, one of our loans we're not going to pay off as quick as I thought, right.
6:18
So how much longer do I have to pay that loan repayment?
6:21
So it's out of cash flow.
6:23
Yes, which means otherwise you could do something with that monthly repayment.
6:27
Yes, You know, so two or three grand a month maybe I've got to, you know, do that for an extra year or something.
6:33
Yeah.
6:33
So say it's 3040 thousand dollars, you're paying off that loan for whatever that time is that's right out of my cash flow, which means you can't do something else with that to make and it hasn't got compounding impact.
6:43
OK.
6:44
So you know actually I need to do that.
6:46
That's really helpful.
6:48
Maybe it's going to cost me overall hundred 100 grand something.
6:52
You know, like if I look at it like seeing what you're talking about.
6:55
Does that make sense?
6:57
Because you're spending the money and not.
6:59
So it's not, I mean, I'm not planning to retire anytime soon or any of that.
7:04
So that's when you ask me.
7:06
You know what, it's hard to do.
7:08
But it's more about just, yeah, not reaching my goals as quick as I wanted to.
7:12
And that's not the end of the world.
7:13
No, it's not.
7:14
It'll still work out.
7:16
Yeah, yeah.
7:17
But I do want to have it planned a bit.
7:19
I probably don't plan it as detailed as Mel, you know, and have all the bookings and things, but generally, yeah.
7:26
Cool.
7:27
Very, very good.
7:28
So that means I have to share something and.
7:32
Hmm, Well, my Sonny boy turned 18 on the weekend.
7:39
Very exciting.
7:41
I now have somebody who?
7:43
An adult.
7:44
How does that feel?
7:44
Yes.
7:45
Thinks he's an adult.
7:47
Oh, she doesn't think he's an adult.
7:49
No, I think he doesn't want to grow up quite just yet.
7:54
I think he's happy being in that space.
7:56
And I think it's a bit overwhelming for him, you know, like just to go bang, I'm here because I you know, I've seen that in kids before and I don't think that's him.
8:04
Like, do you know what though?
8:06
Like school.
8:07
I think that is the thing, I think, I mean, Logan's 23 and I actually think that he didn't want to like, you know how we think, OK, we're a kid.
8:16
We turn 18 now you're an adult.
8:18
It's not actually like that.
8:19
Yeah.
8:20
I think he's still I, I, I mean, before I moved to Sydney, I, I said to him, it's time to adult.
8:26
Yeah, because so.
8:27
Interesting.
8:27
I think he wasn't really ready and I don't even know now would.
8:30
Yes, yes, interesting.
8:31
So I've seen him yesterday he went out and he's bought a toolbox for the back of the Ute He hasn't saved for a car.
8:39
I've mentioned this in previous episodes, but we've got a really old that he'll be driving around.
8:44
I should have bought him a, what is it called a roadside assistance package for his birthday.
8:50
That probably would have gone well.
8:53
It's probably going to be a bit of that.
8:55
Otherwise he'll be calling you guys.
8:56
Not sure how reliable this vehicle is, but he will be driving it and you could see he's starting to those gears and cogs are starting to work.
9:06
So he bought like a toolbox because he got some tool.
9:08
That's what his gift was from us for his birthday, some tools for work as he wants to be a trader.
9:13
He wants to start a building apprenticeship.
9:15
So he's got something lined up which where fingers crossed that all works out.
9:19
And so you can see that he's like wanted to finish school and the brain cogs are shifting into like, I'm about to start work.
9:28
Like it's really happening in the moment.
9:31
And that's really cool to see how, Yeah, that's all panning out for him.
9:39
Yeah.
9:39
But the only other thing that I wanted to mention is so, yeah, we, I know some people.
9:45
I think my mom said to me, if you bought him a car, and I'm like, I knew we didn't buy him a car.
9:51
He can sort that out himself.
9:52
He needs to motivate.
9:56
And then I was talking to some of his friends that were over on the weekend, celebrating on his birthday before they'd even had too many beers.
10:03
So I feel like, but enough beers for them to admit this to me, right?
10:06
So a bit more relaxed than you.
10:09
Young man said to me what he got.
10:11
His birthday was the week before, and I can't even remember what he got.
10:15
He got something and he told me how much it was worth, like it was $700 and he obviously was not happy that that was only $700.00.
10:24
His gift thought it was underdone and then he goes, but it was OK because then I also got this other thing.
10:32
You'll be be able to identify yourself if you are listening to my podcast, Young Man.
10:37
It was a assigned football jumper and some replica medals.
10:44
And he knew that they were worth $1300.
10:46
And he goes, so I was OK because I got that gift, which.
10:49
And he could see his brain cooking because that got him to the $2000 mark, which is now an acceptable gift for 1818.
10:55
And I'm like, yeah, I'm there going, Oh my God.
10:59
Of course their brains are thinking like this.
11:01
But literally like it matters how much you spend on them.
11:06
Like, yeah, they, they're equating that to what Love.
11:09
Yeah, their value, their self worth, like, or how they muscle between their friends, like whether their gift was good enough or not.
11:16
Ego.
11:18
So I'm just, like, puking in my mouth and like, inching away from this kid because I didn't know what to say.
11:23
He's like, really getting into this conversation with me, but I found it awkward.
11:30
Yeah like the expectation is your kid gonna feel OK with this gift I feel like we have strong enough money conversations that it's a bit of water for ducks back.
11:40
I hope for Willow, but you know, it all rubs off Funny how we just put so much meaning behind all of this and value of ourselves.
11:50
Yeah, I think my thoughts there are really think about conversations or what traits that you're leaving your kids with from the way you behave at home.
12:04
And it might not just be from parents, like you said, it could be from all of what's going around that person's, you know, from all the situations.
12:13
But definitely at home has huge influence.
12:15
So yeah, that it's interesting, very, very interesting.
12:21
And the fact that we are giving our kid like this Ute to drive around, which I reckon is a little bit embarrassing, like for him, but he's like owning it.
12:29
He's like, well, I haven't because we keep saying you haven't saved anything.
12:33
You haven't got a job.
12:34
Like maybe I haven't said out loud, maybe would it would have helped you a little bit if you'd shown a little bit more motivation.
12:39
I haven't wanted to say that out loud at all.
12:43
You know, promise anything.
12:44
All I've said is like, well, you haven't saved.
12:46
So you haven't got, you didn't go and get a job, you haven't got, you know, and like, that's up to you.
12:51
That's not my responsibility.
12:53
And then, and he's had to like, I can see him coming to terms with that overtime too, because his friends are all rocking up in cars that their parents have bought them.
13:01
And I, they're better than my car.
13:04
But I look, I mean, I feel that that's a really good message because the other thing is, is incentive to earn and to buy what you want, be in charge of that.
13:16
That's like I, I've talked about this lots of times, but we, we are taking away those feelings that we want as human beings when we've saved towards something and we go and get it.
13:30
And it's our choice of what we have, like actually being able to choose, being able to feel good about it because we, you know, whether it's our sweat and tears that we've had to, you know, give away to do it or we have to and we have to problem solve for ourselves.
13:45
How am I going to go about this?
13:46
If I want this, how am I going to do it?
13:48
Do I have the ability to do it?
13:49
Of course, you've got the ability to do it.
13:52
What are the first steps?
13:53
And that's actually what we're helping him with.
13:55
Like, like the first steps.
13:57
He didn't even know how to book in a driver's test or how to book in some lessons.
14:03
So we're not even doing those basic things for him, you know, So he's had to make those phone calls.
14:08
And it's how do I, what do I say those?
14:10
So there's those.
14:11
We need to uplift them with these basic skills.
14:16
And it might sound silly, but yeah, they have to make the calls, they have to do the things, they have to be able to book in appointments.
14:22
So I think also, you know, we talk about all around money, but we are sending the messages to our kids when we are doing that for them by accident.
14:32
But we are saying to them, we don't think you're capable and we might think we're not.
14:37
Well, we don't have that intention, but that is one of the possibilities is how it's being received.
14:43
Yep.
14:44
But on the back end of that too, if I gave him money or we did and we decided to prioritise that as a financial goal of ours, then that's going to impact our our financial goals as well.
14:58
Do you know what I mean?
14:59
Like we can't necessarily afford that either.
15:02
That's right.
15:03
Yeah.
15:04
So and I, we, I think we see people do this too.
15:06
They want to give so much to their kids at the detriment of themselves.
15:12
So you're sending the message to the kid you're not capable of doing it.
15:17
I'll solve your problems, but they're not demonstrating that you can solve your own problems.
15:22
Isn't that an interesting one?
15:23
That's right.
15:24
And and how does put your own oxygen mask on on 1st?
15:31
Yep, yes, a very.
15:34
Well, good luck, Willow.
15:36
I will see what his journey is.
15:38
Oh, he'll be so exciting.
15:40
Very good worker.
15:41
And he's a good.
15:42
He creates beautiful things here.
15:45
He'll be amazed.
15:46
Anyway, great job.
15:47
Yeah, excellent.
15:49
OK, Our topic for today is home loan optimization.
15:56
So everybody thinks generally this is generally I will put the disclaimer around with general advice today, not personal advice, you know, seek personal advice for your own situation.
16:09
But generally what people do is look at for interest rates to be the only thing that you can do to pay your home loan off sooner.
16:19
And we need to refinance, we need to chase the cheapest rates we need to.
16:24
It's almost like we think it's a 1 trick pony, but it's actually one component of many things that you can do to reduce and pay your home loan off sooner.
16:36
So to begin with, you can pay extra per week.
16:44
Oh my God, really?
16:46
You could that has a massive impact.
16:50
Like that is the biggest and one, the, the one biggest thing that you can ever do with your home loan is pay more off and leave the money in there.
17:00
And I think two people go, oh, I can pay the money off and I've got redraw, you know, so like the money comes in, the money comes out, the money goes in, the money goes out.
17:10
But actually, once you know the numbers, if if the money goes in, you pay extra and it stays in and you see the compounding effect that it has and you cannot see the compounding effect that that will have by looking at your bank account.
17:26
You never will.
17:27
It's so subtle, it's so underlying.
17:30
It happens so slowly at the very beginning of a loan that you don't reap the rewards until later on.
17:37
You actually need to do put those figures into a calculator.
17:40
You need to go.
17:41
If I pay an extra 100 bucks a week off my loan forever I will save $240,000 and 12 years off my loan.
17:51
I'm making those numbers up.
17:52
But if you know that it's going to save you 12 years off your loan, bloody hell, like when that year rocks around and you don't have to pay your loan for the next 12 years.
18:03
We match what you can do with the money.
18:04
Oh my God, we get a double.
18:06
I think we benefit that we're like, that is huge.
18:10
Like amazing.
18:11
If we do some hard yards now and pay that loan off quicker and don't keep spending on it, then our life in the future.
18:17
It's hard to think about the future sometimes the reality of it, but it does come around quick.
18:22
And yeah, it's not just having the money back in your pocket, having that money you can do something else with yes, that I think we forget about, like let's just we're paying it off.
18:34
But it means you can actually do like you think if your mortgage is between, I don't know, 2 and 4000 a month, maybe then that's extra money.
18:42
And that's where you need to really think about it in those real terms because like if you set a goal, that's payment.
18:47
I want to be debt free.
18:48
Like what you said earlier.
18:50
Like to me that's like blah blah, debt free.
18:53
What does it actually mean?
18:54
Like what?
18:56
That's how How much money does that free up and what can you do if your mortgage is 4 grand a month, 4 grand a month and you all of a sudden get to stop paying 4 grand a month?
19:07
What are you going to do with that money, $48,000 a year?
19:10
That's a lot of change.
19:12
You can just go on a European holiday every year.
19:16
How it goes if you did some hard yards now, yeah.
19:20
Or you can like maybe not meet your retirement goals and things like that.
19:25
Life is going to throw you curve balls.
19:28
You like **** is going to happen.
19:30
Like we can set these plans up.
19:32
But if you actually do some of these things, when the **** happens, you'll be better off for it.
19:37
That's right.
19:37
And understanding how much it really makes a difference today.
19:41
So say if it and everybody's in different situations.
19:44
But if you know your numbers and what it costs to Live Today and you're prioritising towards some future goals and this is one of yours, like you get used to not having the $100 a week, Of course you will.
19:55
And it's resetting those like mindset to mindset what you're willing to, what, how you want your everyday to look like as well.
20:03
And that might mean making adjustments.
20:05
And it's like the the friend thing again too, saying I, you know, that's not in my budget.
20:13
We're not doing that.
20:14
I've got other financial goals.
20:16
Saying those things out loud is how you actually change the behaviours and owning up to it, being honest.
20:21
Exactly.
20:21
I would also say so think of all those BBQ conversations.
20:26
You know, I'm not sure if you've had someone, you know, or people around your barbecue and they say, oh, it's all I've paid my house off, right?
20:32
No, they say to me, I'm investing in crypto.
20:34
Oh, crypto.
20:37
But you know, I've paid my house off and everybody wishes they were that person, right?
20:43
So I don't know if that is a goal, then you've really got to understand the ways and things you can do it.
20:49
And one is paying a bit extra consistently with a compounding impact.
20:54
You can save years and years off your loan and save yourself a lot of money if it's a true goal.
20:58
Work out those exact numbers, like if you know your numbers, how much you've got free in your budget and then you go right, well, I want to have a small holiday a year and I've got this much money leftover to put in the home loan.
21:10
It goes in the home loan and it stays in the home loan.
21:12
Know your number.
21:13
Yeah, I know that you can put 5 grand, 20 grand, whatever your number is into the home loan.
21:21
Another thing you can really do is change the frequency of your loan repayments.
21:26
And I feel like this is I feel like it's old school and we've been doing this a lot but people seem to not talk about it as often.
21:33
Well, can I just say that somebody did last night to me.
21:37
So I was in a phone call and I said we're going to write when you refinance our loan mail, we're going to change our repayments from monthly to weekly.
21:45
And I said OK and I did the little calculation for them and I said that'll save you $700.00.
21:52
And I said, I said in 28 years that will set from changing their repayment from monthly to weekly, we'll save them one weekly repayment.
22:02
ND AA deflated, very deflated, yes.
22:06
But then when I said if you didn't just change to weekly repayments, but you looked at a monthly repayment and divided by 4 and paid that monthly repayment weekly, then you're making, it was something like you're making two or three grand extra a year on the home loan and you save a couple of years, you save a couple of years, you know.
22:27
So that came down to though you're making an extra repayment, people.
22:32
That's it really is, yeah.
22:34
Whether you pay weekly, fortnightly or monthly, I don't care, honestly.
22:39
You do what works for your budget.
22:40
There's a tiny bit of benefit because the way home loans were, it is tiny, but you know, it's because the interest is calculated daily and charged monthly.
22:50
That's where you get that little bit of, you know, benefit.
22:54
But it really is those extra payments.
22:56
One week in 28 years.
22:59
Anyway, yeah, but it is knowing those things and how interest is calculated.
23:03
So that's daily calculation of interest.
23:05
But what you really want to know is the compounding effect of like taking extra off your loan.
23:11
And knowing how much you can afford.
23:13
Yeah, the interest rate matters as well.
23:15
It does.
23:15
So yeah, interest rate does matter.
23:17
The thing is, though, we can't chase interest rates all the time because it costs money to refinance from one bank to another.
23:26
So it can cost 1000 to $2000 to move from one bank to another.
23:31
And you've got to go through a whole loan process and provide all your information and then do you know, and leave banks.
23:38
But so you can't, you don't want to be left out of the market on your interest rate, though.
23:41
So if you ignore your interest rate, then you could be paying up to 1% higher than what you need to be like.
23:47
That would be absurd.
23:48
Yes.
23:49
But like, it happens.
23:50
We see it all the time.
23:51
Yeah.
23:51
You know, so you want to be, you want to know what your interest rate is.
23:55
You want to know what you could possibly get in the market and make sure your bank you're keeping them on their toes and getting the best that you couldn't get at least annually doing that right.
24:04
And you need to do the math coming back to knowing your numbers.
24:07
So what is so you can get an interest rate that's half a percent better by the time you take off the cost to refinance.
24:15
Is it still going to be in my interests?
24:17
Yes, and it also depends on your personal circumstances, whether or not you're trying to reduce your repayment or you also want to reduce pay loan off sooner.
24:27
That's right, because if you're making your minimum repayment fine, you get a cheaper interest rate.
24:32
Don't payless yes, just keep paying at the same amount.
24:36
And you know how rates went down, like we were paying like four and a half, 5%, and then it went down to like two, you know, if you kept paying that same repayment.
24:47
Yeah.
24:47
We were like in this happy place going, woo Hoo, that's so good.
24:50
We can't afford everything we want here.
24:52
We want kids, you know?
24:55
But it's, yeah, but that's what we all do, right?
24:58
That's like what the what the world wants you to do too, you know?
25:01
Of course it does.
25:02
That they want you to spend more money, you know, make business go round, make Buffy around.
25:07
Ever get that a winfall or rates come down?
25:09
Because we're expecting rates to come down next year, like in 2025.
25:13
We're thinking rates are gonna start coming down at some stage.
25:16
If you can afford keeping your current repayment exactly where it is or working out if you can pay more, do that.
25:23
People definitely try and build those habits and mindsets of even now what you're going to do when interest rates come down, yes, actually start to plan and and then it happens rather than just fly by the chain.
25:39
Because if you've just signed the direct debit tick form for your home loan, so the bank just takes it out via direct debit, they will take the minimum amount.
25:47
They don't want you to pay no little in house secret.
25:50
They don't want you to pay your home loan off.
25:53
That's why they don't just offer cheaper rates when they do.
25:56
You've got to ask for them.
25:58
You do, you have to ask they, they are happy for you to keep paying.
26:00
Don't make money.
26:01
Don't assume that the bank is working in your favour and looking after you.
26:05
They are not.
26:06
They are looking after themselves and they make the most amount of money off you in their home loan space.
26:11
That's why they keep offering your credit cards and things like that, which we're not talking about today, but that's they're making interest, they're making money.
26:17
That's how they you need to be in the driver's seat when it comes to your home loan, not the bank.
26:21
Yep, Yep.
26:23
So you need to understand how it works.
26:25
You need to definitely get onto our website and look at a repayment calculator.
26:29
And in a good repayment calculator there's something called an amortisation table, which is sort of what Mel was talking about before.
26:35
And you can look at it and if you pay whatever minimum repayment, it'll tell you how much is going towards interest and how much is going towards principal.
26:43
And you can predict what your balance is going to be at any moment in time.
26:47
So if you could say, OK, in two years time I want to know what my balance will be because something might be changing.
26:56
You can actually see what that balance would be.
26:58
And then you could say you can put into that same calculator, if I pay an extra $100 a week, what would my balance be in two years time?
27:07
And if you think about back to the interest rate thing, if people had paid extra when interest rates were low, their balance would have been much lower when interest rates went up, which means you're paying interest on a lower balance.
27:20
So you're actually your money's going further, further.
27:23
Every single time you make a repayment, you're paying less interest and your repayments wouldn't go up.
27:27
More principal.
27:28
That's right.
27:30
So it's really important to understand and look, we need to have a roof over our head.
27:35
So if we have got a home loan doing that, yeah, it's really important that you're optimising it because it's normally one of your biggest expenses, right, That'll rent, you know that and your food are your biggest expenses generally.
27:49
So you need to make sure that you are managing it proactively really well and understanding it, reviewing regularly with interest rates, am I in the market looking at can I pay extra?
28:03
And you can do that different ways and we not haven't talked about offset and redraw.
28:09
So depending on how your budget and your systems and what your bank offers redraws when you pay extra off your loan.
28:15
And we're sort of touched on that.
28:17
But offset accounts do the same thing, but your money sits in separate bank accounts and you can really set up good budgeting structures using offset accounts.
28:24
So every dollar, every day is reducing how much interest you pay.
28:29
So they're the things you need to do and really forward plan and what balances could look like if interest rates, you know, stay the same or a different is over your head.
28:40
But it sounds great but you don't know where to start.
28:42
Just call us because there is a way to collective call in a mortgage broker if you have one and set up a loan appointment to do a review.
28:50
Yeah, any good mortgage broker is going to do that for you.
28:52
That's right.
28:53
But even in that go really proactively with the questions you want to know and help understand, get educated on how they work and how I can optimise my home loan.
29:02
Yep, Yep, Yep.
29:04
Great.
29:05
So that do you have anything else for that 'cause I feel like that's our gold.
29:10
Pay more is my one tip.
29:13
And leave it in there and reap the benefits later.
29:15
Yeah, Reap pay we can reap.
29:18
Yep.
29:18
OK, great.
29:21
OK.
29:22
So a question for the week.
29:25
We just wanted to finish up with something and it's kind of on this same vein of thought around your home loan and fixed rates coming off because we still are seeing fixed rates coming off at the moment and that spike when that happens.
29:42
So if you're in a lower interest rate and you might be on 3/4 or even 5% and coming on to a 6 1/2 percent or 6% interest rate, I'm seeing a few still in the twos that are just about to come off.
29:56
And then you're going from say close to 3 or 2 1/2 to 6% or 6.2 or three.
30:03
And that's a lot of different.
30:04
And so people are scared.
30:05
So they they're like, Oh my gosh, what's going to happen?
30:08
And knowing enough, we've spoken about this before and it's always the same answer.
30:14
It's like knowing how much it's going to go up to and having a plan for that.
30:19
And sometimes like there's nothing we can do about this.
30:22
Interest rates have gone up, you are going to have to pay more.
30:26
There's no magic bullet to re lock into another fixed rate at the same rate.
30:31
It's going to cost you more.
30:33
And if you took that loan out a couple of years ago when rates were low and times were higher, that might have felt really good and easy.
30:42
This is a very different environment that we're in right now.
30:45
And all of a sudden it's $1000 a month on average for a lot of the most a minimum.
30:51
Like going from that, if you're still in that low, you know, or in Two's going to six, it'll be at least it'll be more.
30:58
So how, where are you going to come up with that $1000?
31:02
And look, the last place that we usually want to influence is our income.
31:07
You know, we really usually want to be working with what we've got in the budget.
31:10
Yeah, optimise your discretionary, review your budget and your expenses first.
31:16
But sometimes that might not be enough.
31:18
It might not be enough.
31:19
And So what we are seeing is people going back.
31:22
I've had one of my clients, he quit his job and went back self employed.
31:27
He was able to earn more money doing that making that change and like people going back returning from maternity leave.
31:35
I got a customer like that at the moment and they've actually got an investment property and a home loan and they're I just want to fix tracked that I just mentioned maternity leave.
31:45
I'm going to call it parental people Black.
31:48
Yep, two people make a baby.
31:51
Yes, very true.
31:54
Yes.
31:54
So coming off that and there's a whole lot of navigating.
31:59
So if you've had parental leave for a period of time, and in some respect, you know, this case study is really good because there was a heap of planning that went into that, fixed rates, you know, how much money had to be saved to get through parental leave.
32:15
And I feel like when people have children, that's really good exercise to do, great planning to get you through to there.
32:23
But it's funny how our brain sometimes can only go to a point in time.
32:27
So it was all about for this case study, planning for that, making sure we've got a plan for everything.
32:33
You can't, right?
32:34
You've got to just keep replanning.
32:35
That's right.
32:36
And so, and it was set to this period of now going back to work, but now it's like the next phase, OK, now what I've gotta do.
32:44
And then the prediction of 13 interest rate rises, you know, probably wasn't in the mix.
32:49
So now I've gotta understand, understand what that means and selling, like you said, a whole new for this next part of life and just making new decisions.
33:01
So right way back then, like you kind of planned for the 13 interest rate rises, but you have like an arsenal of things in your back pocket, which is what we call resilience.
33:11
So, and in this case, it was going back to work earlier, like if, yeah, I really needed to just have to go back to work and go back to work, you know, and there's other things and triggers that we can pull.
33:22
We don't need to plan them all to the NTH degree, but we need to know what they are.
33:27
And what would I do if, what would I do if not?
33:30
Like you said, it's not necessarily a prediction of 13 interest rate rises, but there's lots of things in life can throw us.
33:36
That's why resilience is really important, you know?
33:39
Yeah.
33:40
So you think, well, what would I do if.
33:41
And it's, you know, in this case, the what I have to do if has come to fruition and so I have to go back to work for time.
33:48
Having this conversation could be really triggering, you know, like, and this could make you want to actually give up and go, well, **** it a little bit.
33:56
Like this is all too hard like this.
33:58
I feel **** I'm not.
34:00
I can't even make decisions right now.
34:01
It could be paralysing and I would beseech you if you're in that space to get help, like reach out and just mention it to those around you and if you need professional help, go and get it.
34:15
And you might want to reach out to even a financial counsellor, the National Debt Helpline as well.
34:20
Just get the help when you need it and the psychological support as well.
34:24
Because it's all well and good enough for us to say this, that just to do the next thing or whatever.
34:29
But really, it could be paralysed.
34:31
It might be in a situation that you just, yeah, can't think straight, can't do straight.
34:36
And I am being very generous and sexist saying that men keep a lot of this too.
34:40
Like they might, you know, traditionally the freaking primary income earners, whatever, whatever.
34:46
If you're that person who's like, feels so responsible for this, just know that it's not, it's a group effort and that your family and the people around you love you and the life is way more than money.
35:01
Yeah, that's right.
35:03
And as a together, we can do it, Get through things together.
35:06
Everybody even in a in a partnership, people want the other person in the relationship actually wants to be a part of it.
35:14
I have never seen once that they don't want to be a part of it and you just to solve all the problems.
35:18
No way people want to do that.
35:21
Some part times people don't know how to, they might insert themselves in there, particularly if one person has done all the decision making or feels particularly responsible.
35:29
Actually, I definitely see that where people don't know how to step into it.
35:33
And also we don't know how we compare.
35:34
And this is what we do as humans.
35:36
We want to compare ourselves to the people around us and we think that maybe we're everyone's doing better than what we are.
35:41
That's not true.
35:43
It is not true.
35:44
Like, it is hard slog this life sometimes and making ends meet.
35:50
So don't think that you're the only one who's doing it hard.
35:53
And I feel like even the way that we talk on this podcast, sometimes it's like, oh, yeah, it's great.
35:57
We're fine.
35:58
Yeah, it's fine.
35:59
That's right.
36:00
What's going on for people every day, always behind the scenes, you know, there's ups and downs and, you know, all sorts.
36:08
Don't think what you see is actually reality for sure, and what it means to some people, too.
36:15
And Mel and I have all our ups and downs and, you know, you know, through life.
36:19
And, you know, I suppose that's what we're trying to share when we talk about truths.
36:23
And sometimes it does sound like it's all grand, But, yeah, just the everyday things that we have to do, you know, But.
36:32
And that's why we do share it, too, to get that reality check and say, hey, you know, or ask for help or support.
36:41
Yeah, that's right.
36:43
And just share it with a friend or share it with people around you because they, you know, it could be really good for them to chat.
36:49
Very unlikely that you're the first person to have experienced or gone through what you're doing.
36:53
So and that's where seeking some professional support to is good, you know, just lay it all out there and get some help early rather than later.
37:01
But if it is already later, just start.
37:04
Get good people around you.
37:06
Yeah, so I don't know, I know that's kind of leaving on a downer, but it's reality.
37:11
Money is can be **** sometimes.
37:15
And yeah, the more you can plan for it, the better.
37:18
The more you can talk about it, the better.
37:21
And you're not alone.
37:22
That's it.
37:23
We're always around.
37:24
All right, All right.
37:25
Talk to you later.
37:28
At The Money Collective we provide financial wellbeing, premium coaching, mortgage broking and workplace financial wellbeing programs, which we couldn't do without the seamless support of our fabulous team. If you'd like to find out more, head to themoneycollective.com.au or our socials to take action and engage our services. In our Facebook group, join the conversation and help us break down the taboo around money. All content in this podcast is for educational purposes only and is general in nature. For tailored personal advice please seek out a professional.
This podcast provides general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information provided, you should consider the appropriateness of the information and the nature of the financial product in regards to your objectives, financial situation and needs. We recommend discussing your personal situation with a financial professional.
Podcast by:
MEL PEARCE & DARLENE NEU
Co-Founders, Financial Wellbeing Coaches and Mortgage Brokers
The Money Collective
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