A financial overhaul can help fathers realise their dream of independence

DADS matter a whole lot, and they touch every aspect of their kids’ lives. But for most families, the ultimate security is a roof over their heads, writes the Barefoot Investor.

James Millar with his wife Joanne and nine of his children: Scott, Timothy, Hamish, Samantha, Jasmine, Nicholas, Lachlan, Matthew and Joshua. Picture: Tony Gough

WHEN I was younger, I was motivated by trying to attract women (largely unsuccessfully, but that’s another story).

That was a long time ago.

These days I’m a dad, and my motivations have changed.

(It does have an upside though, I now get to wear the same jumper and chino combo most days — it’s my dad uniform — and I couldn’t care less if women looked at me ... and they still don’t!)

As a dad, the thing that really motivates me now is being a hero to my kids. (My wife? Well, the polish has worn off me, but, like a comfy pair of boots, she keeps me around.)

And let me tell you, it’s hard work impressing my boys.

Take this week, when I proudly announced:

Barefoot: “Today I’m meeting the most important man in the country!”

Four-year-old: “Donald Trump?”

Barefoot: “No … the Prime Minister of Australia.”

Four-year-old: “Does he know Jimmy Giggle?” (The ABC Kids host.)

Barefoot: “No, I don’t think so … ”

Every DIK (Dad I Know) is motivated at a deep level to be a hero to their kids. (Of course, the only one who really nails it is Jimmy Giggle … he’s got it all sorted out.)

Kids don’t care how much money their dad has, they just want to spend time with him.

The thing fatherhood has taught me is that deep down your kids aren’t impressed with what car you drive, or the suburb you live in, or the clothes you wear, or even the fancypants people you get to meet in your job — all they really care about is spending time with their hero.

Paediatrician Meg Meeker in her book Strong Fathers says that if dads could look at themselves through the eyes of their kids — and see just how big and important and powerful they are to them — that’s all the status they’d ever need.

So this is a call out to all the dads on Father’s Day.

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Fathers matter a whole lot, and they touch every aspect of their kids’ lives — by giving them love, confidence and security. For most families, the ultimate security is a roof over their heads, so here’s one for all the dads (and mums) who are working hard to get the banker off their backs and get out of their mortgage faster.

If your home loan is with a big bank, there’s a good chance you’re getting screwed.

Get the Banker Off Your Back

I used to describe my mortgage as “like wearing a pair of really nice but really tight shoes”. Sure, they looked good, but they made every step painful, and I couldn’t wait to get home, kick off my shoes and tread my own path.

The word “mortgage” comes from the Old French and roughly translates as “an agreement till death”, and that’s exactly what many young families enter into when they mortgage themselves to the hilt.

But just because your bank gives you a 30-year mortgage, doesn’t mean you should take that long to pay it off.

The day I paid off my mortgage was one of the proudest days of my life. And once you get the banker off your back, it’ll be the same for you too.

If your home loan is with a big bank, there’s a good chance you’re getting screwed. Generally speaking, the banks don’t do the best deals on home loans because … they don’t need to. So let’s talk about what you really need from your home loan.

Rule 1: Don’t get the bells and whistles

A home loan is a pretty simple proposition: you borrow money from the bank to buy a home, and then pay it back with interest over 25 to 30 years.

Most of the bells and whistles the banks market as “special features” are rubbish — their main purpose is to bamboozle you into paying more for things you rarely use. So stay away from repayment holidays, fixing a portion of your loan, and anything else dreamt up by a marketing dude with a ponytail. This is where the banks make their margins.

Rule 2: Don’t fix your rate

Repeat after me: “I promise to stick with the lowest variable rate I can find, regardless of what my brother-in-law Eric recommends at Christmas lunch.”

Here’s what Eric will say: “Man, I got a great deal on a fixed rate — and it’s locked in for five years.”

Here’s your reply: “Yes, Eric, the banks are offering fantastic fixed-rate deals, many lower than the standard variable. It’s not because they want to help you pay off your loan quicker. Rather, since the government banned exit fees, the banks have had to find another way to stop their customers switching to a better deal. Fixed-rate loans give them that power. If interest rates drop lower than your fixed rate, your bank will slug you with a “break fee”, representing the difference between the two rates, multiplied by the length of time left on your fixed contract — which can add up to thousands.”

The only reason you’d fix your rate is if you’re really struggling (like Eric) so you have the security of fixed repayments, but for everyone else it’s too much of a gamble.

Rule 3: Get the cheapest rate

Truth is, just like with many relationships, it’s easier to bitch to your current bank than it is to go through the hassle of switching to another.

Here’s a script that will make negotiating with your bank a cinch.

One phone call can save you $22,064 in interest (based on a $400,000 mortgage over 18 years at 4 per cent).

THE CALL THAT COULD SAVE YOU $22,064

Here’s the deal

It costs your bank about $1000 in marketing costs to replace you (and about six times that amount if you come via a mortgage broker they pay kickbacks to).

That’s your negotiating power right there.

Here’s how to use it

First, I want you to google ‘UBank Home Loan Rate’.

Second, call your bank, ask for the ‘customer retention department’
and use this script:

You: Hello, my account number is ______. I’ve been with you for ___ years, but I’ve applied to refinance with UBank. Their rate is ____ per cent, which is a full ___ per cent cheaper than you’re charging me. Given our longstanding relationship, I’d like you to match the offer — or send me the forms I need to switch to UBank.

Bank rep: One moment, please.

(You’re bluffing, of course. However, the bank’s sales team have strict targets, backed by incentives, that they have to meet — one of which is giving profitable customers discounts to stop them leaving.)

Bank rep: We can’t match the rate you have quoted. However, we understand you are a valuable customer, so we would like to offer you a 0.15 per cent discount.

You: That’s not enough. I’ve already got conditional approval so in order to stay I need at least a 0.5 per cent discount. Could you please speak to your supervisor? I’m happy to wait.

Bank rep (full six minutes later): On reviewing your case, we can offer you that 0.5 per cent discount on your current rate.

You: Brilliant! Please send me an email confirming the new rate and confirming that it will be applied as of start of business tomorrow.

This phone call works

This phone call can save you $22,064 in interest (based on a $400,000 mortgage over 18 years at 4 per cent).

James Millar with his family of ten children.

HARD DAY’S WORK NEVER HURTS

FATHER of 10 James Millar is bound to be spoiled this Father’s Day.

The 48-year-old electrician from Langwarrin attributes his debt-free lifestyle to a solid work ethic that sparked in 1985 when he began work as an electrician at 16.

Mr Millar, who raised his family on one income, said 12-hour days and week-long stints at work saw his savings skyrocket.

“I worked a lot of overtime. I used to have to sacrifice going to some of the kids’ sporting games because I had to work … I placed an emphasis on working hard and paying off our mortgage as quick as I could,” he said.

In 1993, he and his wife Joanne purchased a block of land with a $90,000 loan and began building their family home, which they paid off 11 years later.

“We always paid off more than was needed each week. We got to a point where we wanted to keep the loan for the redraw facility, because we figured we’d never get another loan with so many children,” Mr Millar said.

“In the end, we never drew on that loan and we paid off the mortgage. It was the best feeling we’ve ever had.”

Mr Millar, who has instilled his financial know-how in his children, ensured each child began part-time work from 14 years and nine months, and created bank accounts they could not access until they were adults.

Mr Millar, who is a firm believer in working hard to gain reward, said you don’t need to be a doctor to have some money in the bank.

“It doesn’t matter what kind of job you have. Some people don’t like to work hard … but if you do, you’ll get to where you need to be.”

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Originally published as A financial overhaul can help fathers realise their dream of independence