No quick fixes, just strategy
Social media is buzzing with claims of “secrets banks don’t want you to know” and strategies that promise faster mortgage repayments.
However, property investment firm Opes Partners cautioned against offers that often package basic strategies as exclusive knowledge, charging high fees for advice that is freely available.'
Common strategy, big price tag
Many courses being promoted offer little more than advice on setting up a revolving credit facility – a strategy that anyone can implement with guidance from a broker or bank.
“In one case, a client paid $5,000, believing they were getting a unique system,” Opes Partners economist Ed McKnight (pictured) told RNZ. “But it turned out to be a basic revolving credit strategy.”
McKnight acknowledged the value in promoting faster mortgage repayment but warned against promises that sound too good to be true.
“There is no way to pay off your mortgage faster without paying more money back to the bank,” he said.
Social media ads fuel anti-bank sentiment
The marketing strategy behind these courses often preys on anti-bank sentiment.
“They start with ads on Facebook and Instagram promoting webinars,” McKnight said. “These webinars emphasize how banks profit from interest but avoid offering real advice on repayment strategies until customers pay thousands for a program.”
He recalled seeing one promotion that promised a non-revolving credit strategy, only for the course material to revert to revolving credit in practice.
Market conditions drive new business
The Auckland Property Investors Association general manager, Sarina Gibbon, pointed out that such courses often emerge during periods of economic recovery.
“As the market improves, service providers – lenders, brokers, real estate agents, and coaches – become more active,” Gibbon said.
Brokers should remain vigilant when referring clients to free courses.
“If it’s free, there’s often a catch – either the information is so generic it wastes your time, or the provider is trying to upsell a paid service,” Gibbon told RNZ.
Revolving credit and the surplus myth
Opes Partners managing partner Andrew Nicol emphasised that successful repayment strategies require more than just financial gimmicks.
“The reality is there’s no secret sauce for paying off a mortgage faster, other than paying more money on the mortgage,” Nicol said.
Many courses encourage borrowers to identify a budget surplus to make extra payments, but Nicol highlighted the difficulty of finding such a surplus.
“Most people don’t have much of a surplus, especially now,” he said. “They want to believe they can get ahead, but without meaningful extra payments, they won’t make progress.”
He also noted that revolving credit facilities, often recommended in these courses, come with higher interest rates.
“For most people, it doesn’t work as well as they hope. There’s no silver bullet – it takes hard work and discipline,” Nicol said.
Value in accountability services
While some providers offer minimal value, Nicol acknowledged that others, such as Enable Me, focus on accountability and goal setting.
“They target clients who already have a surplus and need help staying on track,” he said.
Enable Me reports strong demand for its courses, positioning them as a way to develop better financial habits while collaborating with mortgage advisers.
Compliance and transparency are essential
The Financial Markets Authority (FMA), which recently released its inaugural monitoring report on the Discretionary Investment Management Services (DIMS) sector, reminds brokers and financial advisers to be transparent about fees and services.
“Mortgage brokers and advisers must follow ethical standards and disclose all fees associated with their advice,” an FMA spokesperson said.
How the strategy works
For brokers working with clients on faster repayment plans, a revolving credit facility can be effective when used correctly:
- Set up revolving credit: Convert part of the mortgage into a revolving credit facility.
- Direct income into the account: Have paychecks deposited into the revolving credit account.
- Use credit cards for expenses: Cover monthly expenses with a credit card.
- Pay down debt with surplus: At the end of the month, clear the credit card and apply any remaining income to reduce the loan balance.
- Repeat: Continue the process each month to reduce interest costs.
This approach helps clients reduce interest charges while paying off debt faster. However, the strategy’s success depends on maintaining a budget surplus – something brokers should highlight to clients upfront, RNZ reported.
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