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.
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.