“It isn’t about the interest rate, it’s all about how quickly you can achieve financial security by owning your own home and being debt-free”.
Rising rates for most Australians is a cause for concern, however for Crown clients, it isn’t and it shouldn’t be.
Your home loan structure has been deliberately designed to help grow your equity as quickly as possible and live a debt-free life before you retire. You are on track to pay your loan off so much faster compared to your old 30-year loan with the bank’s cheap rate.
A Crown Money client pays on average $32,400 a year off their loan, which is huge compared to the $8,000 the average Australian family is paying off. By paying so much off your mortgage, it means that your interest repayments are reducing every single month, accelerating your debt reduction. The lower your loan balance each month the less interest there is to pay, meaning more of your money is working for YOU paying down your principal.
Many clients have been asking me about fixed rates, and I tell them all the same thing – you have to be careful with fixed loans, they limit your flexibility as you can’t run your income through them or redraw out of them, and the most that banks allow you to pay off a fixed loan each year is around $10,000. If you are intent on fixing then I would suggest you only fix some of your loan, not all of it. Back in our August newsletter, we were all about fixing your rate to guard against future rate rises, but that time has passed. The fixed rates have increased significantly since then (they actually move 6-12 months before variable rates move), and are again much higher than the variable rate.
It is important to remain focused on your goal of paying your house off, which gives your financial freedom and security, not focusing on the interest rate. Prior to joining Crown Money, you were just like every other average Australian family paying an average of $8,000 off your principal debt annually with your cheap rate bank loan. Now you understand that it’s not about interest rate, it’s about the right structure and having the LOWEST TOTAL COST LOAN.
We’ve said it so many times before, and we’ll keep saying it – would you rather a cheap rate loan for 30 years, or a premium loan for only 15 years? Time is your most precious currency and being debt free before retirement saves you years or even decades of your income, which can be put towards lifestyle experiences, or investments.
Looking at the total cost of your loan and the loan term is what will save you the most amount of money, not getting a ‘cheap’ fixed rate.
When you pay your house off before you retire (only 40% of Australians achieve this), you have achieved true Financial Peace and Security.