Ray Hampson Finance

[gadj1976]

Anyone who listens to 5AA or Coast FM would've heard of this mob. They say that their plan is guaranteed to reduce your mortgage by many years. The plan, to pay it off daily, thereby reducing interest.

My question, has anyone used/dealt with/spoken to one of their reps? If so, any advice? I suppose what I'm after is how they make money, seeing as they claim (repeatedly) that they don't touch the money themselves.

Cheers

[Hondo]

I guess they would either get you into a new home loan/debt facility and/or get you invested in financial products both of which they would get paid a commission by the finance company or the investment fund.

They may also charge you a fee for providing their advice

But they probably wouldn't charge for an initial phone call or meeting why don't you give them a call?

[CENTURION]

They would receive what is called a "trail" from the finance company.

[devilsadvocate]

Well said Hondo.

gadj, what I'd add to Hondo's post is that their plan to repay your loan daily is rubbish.

Very simplistically, say you get paid weekly, how can you make a repayment daily without stretching your weekly pay packet our over the week?

For example, If you get paid $1k per week every Monday net into your bank account and your weekly loan repayments are $700 which are due for payment on the same day each week. I'm assuming their model will recommend that you make a payment of $100 per day every day of the week. However, I'm at a loss as to how this actually saves you interest, because if you pay the full $700 off your loan on the Monday, you'll be SAVING interest on $600 on Tuesday, $500 on Wednesday etc over what you'd be paying if you went to the daily repayment plan right down until the cycle starts the following week.

My advice is it's more than likely an elaborate (actually if the above is true, it's not so elaborate) sales pitch aimed at confusing people into switching home loan providers so they can generate a commission and trail of repayments.

If you do decide to follow them up and want more advice on their response/info etc, pm me with the info they provide and I'll be more than happy to check over it to see if you will be better off or not.

I really dislike the whole loan broker business of sucking people in purely to generate a big commission then repayment trail.

[gadj1976]

Well said Hondo.

gadj, what I'd add to Hondo's post is that their plan to repay your loan daily is rubbish.

Very simplistically, say you get paid weekly, how can you make a repayment daily without stretching your weekly pay packet our over the week?

For example, If you get paid $1k per week every Monday net into your bank account and your weekly loan repayments are $700 which are due for payment on the same day each week. I'm assuming their model will recommend that you make a payment of $100 per day every day of the week. However, I'm at a loss as to how this actually saves you interest, because if you pay the full $700 off your loan on the Monday, you'll be SAVING interest on $600 on Tuesday, $500 on Wednesday etc over what you'd be paying if you went to the daily repayment plan right down until the cycle starts the following week.

My advice is it's more than likely an elaborate (actually if the above is true, it's not so elaborate) sales pitch aimed at confusing people into switching home loan providers so they can generate a commission and trail of repayments.

If you do decide to follow them up and want more advice on their response/info etc, pm me with the info they provide and I'll be more than happy to check over it to see if you will be better off or not.

I really dislike the whole loan broker business of sucking people in purely to generate a big commission then repayment trail.

Thanks folks.

Yep DA, your comment above about spreading the $700 weekly payment into 7 x $100 payments is as I understand how they operate. Dunno how it works, but I'm keen to find out.

They claim they do not touch your money, nor ask you to refinance (sorry I should've said that up front). Hence I'm not sure how it all works.

I made a call to them late yesterday and the guy is coming over to see us on Tuesday. I'll keep you updated on how it all works, providing I understand it of course.

[Dutchy]

you cant make payments on the weekend for a start....

[Pseudo]

For example, If you get paid $1k per week every Monday net into your bank account and your weekly loan repayments are $700 which are due for payment on the same day each week. I'm assuming their model will recommend that you make a payment of $100 per day every day of the week. However, I'm at a loss as to how this actually saves you interest, because if you pay the full $700 off your loan on the Monday, you'll be SAVING interest on $600 on Tuesday, $500 on Wednesday etc over what you'd be paying if you went to the daily repayment plan right down until the cycle starts the following week.

Assuming of course that your weekly payment happens at the start of each cycle. If it happens at the end, then paying daily will save you a marginal amount of interest.

An example:

Say you take out a 300K mortgage at 8.5% over 30 years, paying fortnightly. Interest is charged daily at the rate of 8.5/365 % per day.

If you pay $1063.20 each fortnight (on the 14th day, the 28th, 42nd, ...) it will take about 30 years to pay the bugger off, and cost you $527243 in interest.

However if you pay $1063.20/14 = $75.94 every day (on day 1, 2, 3, ...) then slightly less interest will be charged daily since the balance decreases with each computation. You'll end up paying only $521563 interest, a grand saving of $5680. The loan will be shortened by about 7 fortnights.

So yes, paying daily will save you a little compared with paying once (at the END of the cycle). However the amount of saving is likely to be negligible compared with the total interest paid over the life of the loan. Bottom line is it's a gimmick.

[boags]

The more you pay off your home loan the quicker you will pay it off. Simple.
Loans with redraw and offset allow you to have your pay paid directly into the loan account. Any amount deposited in the home loan account reduces the principal that the interest is calculated on daily, thereby saving you interest from the day you get paid.
Money for spending is transferred from your loan account into your transaction account the day before you plan to get it out of the ATM.
These accounts may or may not have a higher rate of interest, and it may (or more likely may not) be worth switching into when you take into account fees for leaving your lender & starting a loan with another lender.

Alternatively, with an old style home loan simply pay whatever spare money you have off the loan whenever you can.

[bayman]

the only thing i know with this subject is if you pay a home loan every fortnight you pay an extra payment per year

eg

paying monthly = 12 payments
paying fortnightly = 13 payments ( 52 weeks halved)

as for ray hampson, i've heard the adds on the radio & thought he wouldn't be doing it for nothing, so thanks to those who posted about 'trails' as that makes sense to me

[Psyber]

Offset accounts are a good bet - make sure all your income goes into it and keep the balance up.
I liquified some assets at the right time by sheer luck, and I currently have almost as much as the mortgage stashed in an offset acount.
So, almost all the monthly payment comes off the principle, and the cash in the account is effectively earning over 8%.
There are no capital gains, but as things turned out that doesn't matter much yet.
I'll leave it there a little longer until I see clearly where best to put it for the longer term.

[Dutchy]

the only thing i know with this subject is if you pay a home loan every fortnight you pay an extra payment per year

eg

paying monthly = 12 payments
paying fortnightly = 13 payments ( 52 weeks halved)

as for ray hampson, i've heard the adds on the radio & thought he wouldn't be doing it for nothing, so thanks to those who posted about 'trails' as that makes sense to me

actually 26.1 fortnights p.a. Bayman.....I dont think anyone would be paying their H/Loan monthly these days but if they are they are falling behind...

[Psyber]

the only thing i know with this subject is if you pay a home loan every fortnight you pay an extra payment per year
eg
paying monthly = 12 payments
paying fortnightly = 13 payments ( 52 weeks halved)
as for ray hampson, i've heard the adds on the radio & thought he wouldn't be doing it for nothing, so thanks to those who posted about 'trails' as that makes sense to me

actually 26.1 fortnights p.a. Bayman.....I dont think anyone would be paying their H/Loan monthly these days but if they are they are falling behind...

I am paying monthly, but using the offset account and keeping its balance up. Yes, I could possibly save a little more by paying fortnightly or weekly as well, but monthly is convenient.
I never intended the mortgage to run the full term anyway, as I planned to move on aftern several years.

[Dutchy]

Psyber has a mortgage

[devilsadvocate]

For example, If you get paid $1k per week every Monday net into your bank account and your weekly loan repayments are $700 which are due for payment on the same day each week. I'm assuming their model will recommend that you make a payment of $100 per day every day of the week. However, I'm at a loss as to how this actually saves you interest, because if you pay the full $700 off your loan on the Monday, you'll be SAVING interest on $600 on Tuesday, $500 on Wednesday etc over what you'd be paying if you went to the daily repayment plan right down until the cycle starts the following week.

Assuming of course that your weekly payment happens at the start of each cycle. If it happens at the end, then paying daily will save you a marginal amount of interest.

An example:

Say you take out a 300K mortgage at 8.5% over 30 years, paying fortnightly. Interest is charged daily at the rate of 8.5/365 % per day.

If you pay $1063.20 each fortnight (on the 14th day, the 28th, 42nd, ...) it will take about 30 years to pay the bugger off, and cost you $527243 in interest.

However if you pay $1063.20/14 = $75.94 every day (on day 1, 2, 3, ...) then slightly less interest will be charged daily since the balance decreases with each computation. You'll end up paying only $521563 interest, a grand saving of $5680. The loan will be shortened by about 7 fortnights.

So yes, paying daily will save you a little compared with paying once (at the END of the cycle). However the amount of saving is likely to be negligible compared with the total interest paid over the life of the loan. Bottom line is it's a gimmick.

Sorry mate, but I still can't see how this saves you money? If people get paid on the 14th, how can they start making daily repayments from the 1st unless they've help money back from the previous month, in effect costing them MORE interest? The only way your example works is if you get paid on the 1st, but your loan payment comes out later in the month - on the 14th as in example.
You're still better to just pay as much as you possibly can as soon as the cash comes through the door rather than spreading payment out over days/weeks etc.

[Punk Rooster]

wouldn't a more sensible strategy be to pay an extra $20 p/week or fortnight off your loan?
This would offer you greater long term benefits surely....

[Dutchy]

wouldn't a more sensible strategy be to pay an extra $20 p/week or fortnight off your loan?
This would offer you greater long term benefits surely....

Spot on

All mortgages calculate their interest on the balance at the end of each day therefore any $ you put in will reduce interest immediately...its not a hard concept, the more you put in the more you save, some finance companies try to confuse people though

[Psyber]

Psyber has a mortgage

That's what I get for letting my wife and daughter choose this house in 2003.
The one we sold only half-paid for this one and everything else was tied up. I'm fixing it all up soon, so I'll no longer shock you.

[Psyber]

wouldn't a more sensible strategy be to pay an extra $20 p/week or fortnight off your loan?
This would offer you greater long term benefits surely....

Spot on

All mortgages calculate their interest on the balance at the end of each day therefore any $ you put in will reduce interest immediately...its not a hard concept, the more you put in the more you save, some finance companies try to confuse people though

That's where off-set accounts come in too. The balance in them comes off the outstanding principle before the interest is calculated.
As I said elsewhere, I liquified some assetts recently before the collapse and at the moment have nearly the full amount of my mortgage in the off-set account.
[It was luck - I'm not claiming to have predicted the collapse.]
So, nearly all my payment is coming off the principle at the moment.

[Pseudo]

The only way your example works is if you get paid on the 1st, but your loan payment comes out later in the month - on the 14th as in example.

Yes, at the END of the fortnightly cycle, like I stipulated.

You're still better to just pay as much as you possibly can as soon as the cash comes through the door rather than spreading payment out over days/weeks etc.

i.e. you're better off paying at the START of the cycle. Agreed.

Paying a lump at the START > paying daily > paying a lump at the END.

Nevertheless the difference is minimal.

[mick]

These guys are basically suggesting line of credit type finance (ANZ equity manager is an example), which as others have alluded above means paying your entire salary off on the mortgage and making full use of the interest free period on credit cards, but ALWAYS paying the credit card in full. I can recommend it me and the Mrs borrowed $200K about 10 years ago, paid it off in 7 years without any noticable change to lifestyle. The downside with regard to this type of finance is to resist the temptation to spend the "extra" money, so financial discipline is required otherwise they are a disaster and you can end up owing more than you started with.