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Mortgages, loans and credit cards: What the Banks don’t what you to know
The banks have so much control over you and your life. You really have to fight to reduce your dependence on the bank as a source of funds. It's just too easy to go along.They make it easy to get into debt.
The banks' focus is to make a profit for their shareholders. The banks' marketing strategy is to ensure that the householder has the maximum level of loans, which can be repaid consistently, to maximize profits. Lets look at the level of profitability of bank loans.
- Mortgages......................................5 - 6% interest
- Business loans.................................9% interest
- Personal loans.................................12 -18% interest
- Credit Cards...................................17 to 24% interest
Draw up a list of all the loans, mortgages, credit cards, car loans, store cards. Write down 5 columns across the page with the following headings.
- Bank name
- Type of debt product
- Balance owning
- The interest
- Monthly repayment
Is this you?
- Usually the first significant purchase of a person or a couple is a house. (Note the interest above.)
- Immediately the householder receives a number of credit cards sent to them and without advice or training uses those cards to develop the house (see the interest above)
- Twelve months later they find that they are carrying far too much debt and become concerned about it.
- They now have no cash balances and are totally dependent on the banks as sources of cash and credit.
- Then comes the car. The banks lend the money for a car at 12 -15%
What you have to know that would take away the power of the banks, and what the banks don't want you to know
It's this. A well organized mortgage home loan can allow the householder to self fund their personal loan and credit card requirements normally sourced from the banks. Anyone can do it and the result is the same for all people. The banks' fear is they will only "get" the low profit home loan and miss out on all the normal profit. See table above.
When you start seeing a mortgage as wealth creation you alter your perception to wealth creation and your dependence on the bank. How can that happen? Its all about making additional payments into your mortgage on a consistent basis. Contact a mortgage broker and ask to see the software and calculators that can demonstrate this.
- Paying additional payments into the mortgage
- Redraw money from the home loan rather than go to the bank for credit cxards and personal loans.
A surplus of $500 - $1000 a month can have a huge impact on the mortgage balances. How can these surpluses be created? The simplest and least intrusive method is to debt consolidate all old debt with very high interest rates, replaced by new debt with low interest rates. This will create a mortgage consolidated surplus. Use this consolidated debt surplus to create wealth by putting it into the mortgage.
How it works
- House with a $300,000 mortgage
- Paying 5.09%
- 30 year mortgage
- Paying $1627 per month in repayments
- A consolidated debt or budget surplus of $1000 a month that is paid into the mortgage.
In 12 months you would have a redraw balance in the mortgage of $12,336. Would this take care of most of the issues that come up which would normally require credit cards and personal loans? In 24 months the redraw balance is $26,314. Now you are heading to financial independence from the banks.
A determination to break the cycle and patience to build your cash balances before you start spending is the key. Just knowing gives you the motivation to get to the redraw cash balance to gain the confidence to move forward to real wealth.
You now have the facts to plan moving forward. So don't talk yourself out of contacting a mortgage broker. Sitting and doing nothing only increases the stress and anxiety, not a good option
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