When it comes to refinancing, banks often promote the appeal of lower monthly repayments. But beware—this is one of the oldest tricks in the book, and it’s designed to keep you paying the bank for as long as possible because they always try and reset your loan term back to 30 years each and every time.
If you understand how a slightly higher interest rate over a short term is actually saving hundreds of thousands in the long run, it’s your ticket out of Mortgage Prison.
The Bank’s Playbook: Keeping You in Debt for 30 years
Banks have one primary goal: profit!
Each year you remain in debt, they continue to profit from you by charging you interest. When they encourage you to refinance, they get to reset the clock on your mortgage, trapping you in a new 30 year cycle of interest payments.
Think of your mortgage as a 30km marathon. Imagine going back to the start line every 3kms, you’re never going to finish that 30km marathon.
While you might see a short-term benefit in reduced monthly repayments, the harsh truth is that you’re paying hundreds of thousands more in interest.
Banks know those most Australians are looking for the immediate savings that come with lower monthly repayments and don’t consider the long-term consequences. They use this mentality to entice you in, often without explaining that extending your loan term means far more interest paid overall.
“Taking advice from banks on how to structure your loans, is just like taking nutrition advice from McDonald’s”
Loan term is one of the sneakiest yet most important factors in refinancing. When people say, ‘I want the smallest repayments possible,’ or, ‘I saved X amount a month on my new repayments,’ there’s often a catch. Sure, lower repayments sound appealing, but refinancing will lead to paying the bank back 30 years’ worth of interest.
The proof is in the pudding:
If you took out a $1M loan:
6.27% Interest (30-Year Loan): Total interest paid would be around $1,221,267.
7.5% Interest (15-Year Loan): interest you pay would be approximately $668,622.
That’s a difference of over $550,000 even with a higher interest rate. Imagine what you could do with that $550,000 if it weren’t going toward interest. You could fund your retirement, set up your kids, invest in property or finish work sooner.
The refinance trap is why so many Australians still have mortgages well past retirement age, forcing them to continue working well into their 70s. Remortgaging can be tempting, but it could mean giving up the well-earned rest you deserve after decades of hard work. Instead of spending valuable time with your kids and grandkids you may find yourself still burdened with the weight of interest payments in your golden years. The security of a paid-off home is something most Australians look forward to, and extending debt beyond retirement is one of the biggest obstacles to achieving it.
Our focus is on accelerating your Home Ownership by shortening your loan term.
By helping you pay off your mortgage faster, we reduce the total interest (the bank’s profit) that you pay. Banks benefit when you pay interest over a long term, which is why they offer deeply discounted rates to get you in the door but aren’t interested in helping you own your home. As no one makes money from you when you’re debt free.
Our structure isn’t focused on matching the cheapest rates; it’s about ensuring your money is optimised, and works for you rather than the bank.
When I started this company back in 2001, I saw people caught in an endless loop of refinancing, chasing lower rates but making no real progress on their mortgage. My clients were often high earners, but their mortgage balances weren’t moving, and they had little to show for years of hard work. With every new refinance, their loan term was set back to 30 years, effectively keeping them at square one and stuck on the debt treadmill.
Our mission is straightforward but powerful: helping you avoid the traps that banks set to keep you paying interest. Shorter loan terms might come with slightly higher monthly payments, but the long-term benefits of owning your home outright, far outweigh the short-term convenience of a lower payment.
