40-Year Mortgage! Genius or a Debt Trap?

Rory: 40-year mortgages have become a bit more common. Now, they're not here in New Zealand, but I can almost guarantee that we will be seeing them in the mainstream in the next 10 years.

Daniel: So right now in the States, you can get a 40-year mortgage. They've even got 50-year mortgages.

Rory: They just walk into the shop and get given a 40-year mortgage. That's where I find it really scary.

Daniel: I turned 40 this year. So if I had been able to somehow muster up a property when I was born, I'd just be debt free.

Rory: You're paying more interest. Doesn't that make you want to throw up on the 40-year?

Daniel: Not necessarily, Dan.

Introduction and Episode Context

Rory: Welcome to the next episode.

Daniel: Thanks, mate. Blueprint Podcast.

Rory: Oh, thanks for having me, mate. Episode 10. We're chewing through it, aye?

Daniel: Yeah, we are. It's a bit of a milestone, aye?

Rory: Yeah, absolutely. What was that statistic you mentioned about podcasts?

Daniel: Oh, I think my numbers are slightly wrong, but I think it's about maybe one in five podcasts get to 20 episodes.

Rory: Yeah, I thought it was a lot lower than that. So less than 20%. So our goal is to be in the top 20%. Absolutely. This year.

Daniel: Oh, that's brilliant, man. Well, look, it's the Blueprint Podcast. We talk about all things mortgages, insurance, and finance, and keeping our clients and referral partners informed.

Rory: We've got a really fun topic today. We had a lot of fun planning this episode because it's such an interesting topic and it's around your repayment term, your loan, and we're talking all about 40-year mortgages today. So why this is sort of more current—obviously, debt levels in countries like New Zealand, Australia, especially, and Canada as well, have reached a point where, to make options more affordable for people, 40-year mortgages have become a bit more common. Now, they're not here in New Zealand, but I can almost guarantee that we will be seeing them in the mainstream in the next 10 years. That's my opinion.

Daniel: Why do you think that?

Rory: Just where things are going, the way that the financial industry is developing with all the different products that are available. It was a thing previously in New Zealand, back in the seventies and early eighties, you could get a 40-year mortgage, and for responsible lending purposes, they made it exclusively 30 years, but things have changed so much. We'll get into that in the podcast, but things have changed so much over the years and it's made it a bit more, I suppose, justifiable as a product.

Daniel: Now we're also going to be sharing our opinion on the 40-year mortgage. We're looking at it from every angle. We're not just going to shoot it down and say it's a horrible idea, are we?

Rory: Absolutely not, you know? We can make an argument for or against it, you know? I mean, perhaps I'll be more on the "for" end and you'll be on the "pay your mortgage off faster" end.

Daniel: Should we do that? Should we do it? Because that's very on brand for me, isn't it? Pay off your mortgage.

Rory: It is. So we'll play that game. And we'll do the pros and cons and have a bit of a conversation, because it's a very thought-provoking exercise, what we're going to undertake.

Daniel: The 40-year mortgage. There's a couple of perspectives as well, aye. There's for home ownership, and then there's for investment. You can make an argument for both, but you can very clearly define when it's good and when it's bad, and we'll do that as well.

Where 40-Year Mortgages Exist

Rory: I suppose getting into it, 40-year mortgage—obviously, we've already got your 30-year mortgage. That's the staple here in New Zealand. Which countries are looking at 40 years or providing 40 years?

Daniel: So right now in the States, you can get a 40-year mortgage. They've also even got 50-year mortgages.

Rory: Which feels a bit sickening to say that, you know, it's wild, aye. California, 50-year mortgages, and the UK, the mainstream banks provide it, very long terms in Japan.

Daniel: What sort of terms are we talking in Japan?

Rory: I think you can get really long-term mortgages, like 50, 60 years, but the property industry in Japan's very unique. It's very low price. Big cultural differences as well. Massive around home ownership, massive cultural differences. So real estate, it's not even comparable. Like it's such a unique economy, Japan, you almost can't compare it to the rest of the western world, you know, with the ageing population, like how they actually manage their workforce. All that sort of stuff. Fascinating though, aye.

Daniel: Yeah, but I suppose the good comparisons for us, because we're—it's always Australia. Like I like to think that we're 10, 15 years behind them and the main banks have started to introduce the 40-year there, Canada and obviously, yeah, there's some in Singapore as well with restrictions on LVR. So it's a thing. It's only a matter of time until they're not commonplace, but they're a piece of the puzzle here in New Zealand.

Rory: How new are they in Australia?

Daniel: I think they've been around for a while, but they're becoming very mainstream now.

Rory: Right, okay. With the size of the loans there and the repayment plan. So, I mean, you can play it any way. You can say, look, if we've got another asset base, if we've got a big super, you might want to allow a 40-year term because you're always going to be able to pay off the debt when you retire. But I think the big thing to focus on is like this concept of paying so much more interest to the bank.

Daniel: Right. Yeah, like, I think we did the numbers. If you have a $800K loan and you pay over a 40-year instead of a 30-year, it's something—it's almost $400,000. We've got the number here. Right. It's almost $400K extra interest that you're paying.

Rory: It was $386K.

Daniel: Okay. But we also talked about opportunity costs.

Rory: Right. We'll get into that. Okay. I think touching on that, like the big reason why the handbrake's been put on for 40 years here is because of the responsible lending code.

Daniel: I believe I'm very proud of the responsible lending code we've got in New Zealand. I think it's very appropriate and, you know, some could even say it's relatively strict, right? If you have just an owner-occupied home, every time you're applying for a loan, you have to get approved on, say, what they refer to as an exit strategy. So like, if you have a mortgage, how are you going to be debt free for retirement? That's essentially the question the bank is asking. You're not going to get approved for a loan in the main bank if you're going to be into retirement with a big mortgage and no way to pay it off.

Rory: So first home buyers in their forties. Can we do that in New Zealand?

Daniel: Yeah, absolutely. Bread and butter.

Rory: So what, late forties?

Daniel: Yeah, late forties. So what they'll do if you don't have any other assets, so like, when they talk about exit strategy, you could say, look, I've got a super, I've got $400K or $300K in KiwiSaver. When I retire I'm going to sell my house, or I'm going to withdraw my super and pay it off. That's an exit strategy, right? I've got a second property. When I retire, I'm going to sell the investment property and pay off my home mortgage. That's an exit strategy. What's not an exit strategy is, oh, I've got these forecasted gains for my KiwiSaver. I'm going to use that to pay it off. That's not an exit strategy. Unrealised gains, you know?

Rory: Okay.

Daniel: Another one is, oh, I'm going to inherit my family's estate. That's not an exit strategy to the bank. Because it's not confirmed that you're going to inherit, you know what I mean? So there are different ways to skin it. But going back to your point, you know, for people in their forties, fifties, we help all the time with first home buyers, but you would just have a reduced loan term. The loan term that they work towards is a retirement age of 65 or 72. So 72 is like the top end as a retirement age. So let's say if you were 50. You could still buy your first home, but you'd have to pay it on a 22-year loan term.

Rory: Okay.

Daniel: Do you know what I mean? So that would be the restriction there rather than getting a 30-year mortgage and just saying, oh, I'm going to make lump sum repayments. No, the bank says, we're actually only going to approve it on a 72. 72 is sort of like the maximum as well. Loan term you can get.

Rory: Okay.

Daniel: So that's a really big reason why they're not commonplace here is because we've got a really, you know, good, stable, maturity risk, responsible lending in New Zealand. It's a really big part why it's not a big part of it.

Rory: It's interesting though because on that basis, you can pull that age back because we're talking about client age, maturity risk, a 50-year-old buying a first home. Why then can't a 30-year-old buying a first home on a 40-year term? Do you know what I mean? They've got the runway. There's no maturity risk. By the same argument.

Daniel: No, you're exactly right. Like if you were to have the exact same market, it would fit within the responsible lending code. If you are in your thirties and you were going to retire at 72, it would fit within the responsible lending code.

Rory: Right. And that's why it's in Australia now and that's why it's coming to New Zealand. That's why we're talking about it.

Daniel: Yeah, exactly. I mean, you know, responsible lending code or not, you can't penalise someone if they want to pay more interest.

Rory: Yeah, that's right.

Daniel: Yeah, exactly. The banks won't object.

Affordability, Costs, and Housing

Rory: Yeah, I feel like the 40, it's such a taboo topic. Because obviously we were talking to some of our colleagues about what our topic was today, and they said, look, even 30 years is a stretch. You know what I mean? And so this idea of now having 40 years, especially for those who are very focused on, you know, paying off your mortgage faster, get debt free as quickly as you can, and also those who are against property ownership at all—just living in your own home, you know, invest in property, but rentvest, you know? Rent where you live and own rental properties, right?

Daniel: Yep.

Rory: So there's that. I mean, they would be hating this idea.

Daniel: Yeah, absolutely. Rolling around filthy about it. When the day, when 40-year mortgages come to New Zealand, you know?

Rory: It's contrary to a lot of what we preach, aye, you know?

Daniel: It seems the goal is to pay it off faster.

Rory: Yeah, absolutely. That's what we like to help our clients achieve, right?

Daniel: Yeah, yeah, for sure. I'm a big pay-it-off-quicker guy. I'm going to preface this and we're going to get into it in a second, but I'm a hundred percent—any opportunity to pay off your owner-occupied mortgage quicker, you should do it. But I'm also open to investing alongside that. Having investment properties, putting cash towards investment properties. But if you have an opportunity to pay off your owner-occupied mortgage faster, you should do that. Why not? Doesn't have to be a five-year term, 10-year term, but even a 20-year term, buy a property where that's affordable or will become affordable as your income increases.

Rory: Before we do some numbers, we'll get into some pros and cons of it. So yeah, I guess the biggest one is just affordability versus cost. Like that repayment is going to be much more affordable. Like we said, we'll work on the figure of the $800K mortgage. We did the numbers. It's $400 a month cheaper.

Daniel: Right. So on a $800K loan, on a 30-year term, you're looking at about $4,800 a month. And on a 40-year term, about $4,400. It's not a huge discount for another decade of repayments.

Rory: Right. It's actually not, it's just over 8%. For the folks at home, we're going to work off a 6% interest rate for our example. And that's just assuming that's your average rate. So I feel that's quite conservative as well in terms of being quite a higher rate. That's, in recent years, probably a good middle rate.

Daniel: It doesn't feel like that much savings. Cashflow savings, you know, $400 a month.

Rory: That's right. Depends on what we do with it though, aye. Foreshadowing where this conversation's going. I like it. Depends, depends on what we do with it. But for some people that's, that's a lot, you know?

Daniel: Absolutely. And it may be $4,400 is an affordable figure and $4,800 not.

Rory: But where I really don't like the 40-year mortgage is like when you can't afford a 30-year mortgage. So you get the 40-year, like with your actual cash flow. I really don't like that because it just means, look, this isn't affordable. This option isn't affordable for me. It just will be putting you in a position where we know we are not going to be able to reduce that debt. You know what I mean? So that's something to think about.

Daniel: Some stats in New Zealand and from what we see from our clients—the cost of housing in New Zealand, which traditionally we spend a lot on the cost of housing, a lot of our income compared to other countries, more so the States. I mean, Australia's the same, Canada's the same. 50 to 60% of your net household income goes towards housing.

Rory: That's crazy.

Daniel: That's like standard in New Zealand. The clients that we deal with, it's pretty standard, especially in Auckland. 50, 60% of your income's going towards your housing. That's all costs included—your net income after tax. That's all costs included. You know, your rates, insurance, maintenance, that stuff's going to go towards your housing. It's a massive part of your expenditure.

Rory: It's quite a wild figure. Is that recommended to us?

Daniel: Yes. You know, that's what you spend to pay off your mortgage, get ahead and build your base, your asset base, which is the most important asset, which is your family home.

Rory: What would the numbers be if you are a renter living a similar lifestyle? Any idea on that?

Daniel: So, because I've thought about—we spoke about this, about my place. If you rented yours out. I think at the peak of interest rates and what we think we would rent our house for, it was about a 33% premium. So we're probably sitting in that 50, 60% with the mortgage. Versus if you're renting, you're probably down at like 40%.

Rory: Yeah, 30 to 40%. I'd say, yeah, probably in that middle 35%, aye. Let's just say that because you take away some of those costs, you're not paying rates, you're not paying maintenance as well.

Daniel: Absolutely. Just paying your utilities. It's a fixed cost.

Rory: Yeah, you're just paying your utilities. So, I mean, there's no question about it that it's going to be much cheaper if you are renting, you know? In the short term.

Daniel: Right. But if you're owning, obviously you've neutralised, you've set the lid on your expenses of your household. You know, you said, look, this is what I pay for the property and one day the house can be paid off. You know, you neutralise your cost to live.

Rory: And then you can't do DIY on a rental, you know?

Daniel: Oh, so what sort of life are you going to be living?

Rory: Depends if the landlord's your mate. I had a client who had a rental property, had the tenants in there for 20 years and they said, look, I'm going to rent forever and they were a bit handy. They said, can I just make the place a home? They said, yeah, no problem. And so they let them fully renovate the bathroom. It's like if you want to spend your money on that, go for it.

Daniel: That's crazy. Like the landlord's living the dream here, right? I mean, how good does it get?

Rory: Next minute the valuation's gone up and he decides he wants to flick it.

Daniel: Flips it, aye.

Rory: Do you want to do the laundry before we move on?

Daniel: Oh my God, that would be naughty.

Rory: That's what people are spending on housing and I feel like if that was stretched out to 40 years, then yeah, it's not making financial sense long term, but we'll have a chat about that when we do our numbers in a bit.

Daniel: What about Dave Ramsey's numbers? You've written something down here just so we can have a little bit of a boo-hoo moment. A lot of people might know him—he's big online. He is a financial influencer in the States. He's an old American guy. He is like, pay your debt.

Rory: I know who you're talking about. I really like some of his teachings, but he's a bit hardcore, you know? And so obviously housing's a complete different kettle of fish in the US. It's a lot cheaper. And so he recommends to people who follow his teachings, if you're going to buy a house, get it on a 15-year loan term, and the repayment can only be 25% of your take-home pay.

Daniel: Yeah, you need a bloody good mortgage adviser in New Zealand to pull that off.

Rory: Or you need a massive income.

Daniel: You need a massive income to pull that off in New Zealand. So that's not applicable even in America now. The people who follow him are saying, look, Dave, like, well, we get what you're saying. You know, pay all your consumer debt off, live frugally, invest 15% of your income. But this number doesn't make any sense. We can't buy family homes anymore. You know, the cost of housing has gone up and we have to accept that's going to be part of our life now, you know?

Rory: Gee, that would be lovely, aye?

Daniel: It's a bit out of touch and I mean, where it sits is when you're doing your own budget, 50 or 60% of your net income going towards housing is pretty normal.

Rory: Okay.

Daniel: Borrower suitability, I mean, this is the big thing like you touched on at the start. If someone's in their forties, is a 40-year term, is that going to be feasible? What do you think?

Rory: Well, not if the goal is to have a freehold home to retirement, because you won't get there.

Daniel: You're not going to get there. And that's the responsible lending code—we have to have a plan to be debt free with a retirement age, and we have to present that to the bank and the bank needs to sign that off. Right? So it wouldn't be approved.

Rory: Scenarios where maybe it could work—you're a business owner and you had the belief that you would have a sellable business at some point in time, maybe. So then there's a lump sum that you could trim off the rest of the mortgage, you know?

Daniel: A hundred percent. So you could probably make arguments where it could work, but generally speaking...

Rory: Yeah, generally speaking. I mean, that's the thing, exactly what we were saying before the show. If you are an entrepreneur, if you have ways to utilise your capital outside of paying off your mortgage—because paying off your mortgage is a guaranteed return. But if you have ways to leverage your capital and get a higher return, then that's where a 40-year mortgage could come in handy. But where I find it so scary is for people who aren't being explained the risks, they just walk into the shop and they get given a 40-year mortgage. Like that's where I find it really scary because they didn't even know that, you know, 30 years used to be the standard. If that becomes the new future, that's where I find it really concerning—it is those who, the less financially literate who aren't getting the right advice and are just paying more interest than they have to and not being debt free sooner.

Daniel: Yeah, absolutely. And we looked at like the first 10 years of repayments and a few differences there. Obviously on a 30-year term, you eat into more of that debt. So if you end up having like dips in the market, like these recent COVID boom and then bust peaks and troughs in the market and you were looking to move and things like that. So you want to have a certain amount of stability, I think, if you're locking in a 40-year term.

Rory: A hundred percent. I mean, are we just completely changing the way we view housing? You know, like it's just going to be a payment. Like you pay, you are always going to be paying. I think that's kind of what the 40-year makes me feel like. And it's not good. That viewpoint, you've got to be looking at your mortgage as a thing, it's like, how can I reduce this as quickly as possible? How can I? It seems like a long time.

Daniel: I turned 40 this year. So if I had been able to somehow muster up a property when I was born, I'd just be debt free. And I feel like there's a lot of water under the bridge. 40 years. A lot of times, a lot of stuff's gone down.

Rory: Yeah, absolutely. And a lot of the years, I can't remember it very well either.

Daniel: I don't know. It seems like a long time to me.

Crunching the Investment Numbers

Rory: This is a really good segue into our case study, which is a comparison between, I suppose, two sets of people—one who chooses to take a 30-year mortgage, one who chooses to take a 40-year mortgage. So if we actually do some role play now, because you...

Daniel: Okay.

Rory: There's a ten-year age gap between you and me. I'm going to be the bloke on the 30-year mortgage, and you are going to be the bloke on the 40-year mortgage.

Daniel: I'm going to play the long game.

Rory: You're going to play the long game. So do you want to explain to the folks at home what we're going to be doing? What opportunity costs are we comparing here?

Daniel: What we've worked out in this example is if you took that $400 a month saving and invested it. So a big assumption to make because we know that Kiwis generally aren't very good at saving or investing.

Rory: No, they're not. They're not. Horrible.

Daniel: So, except if it's KiwiSaver.

Rory: Yeah, compulsory.

Daniel: It is compulsory and no discipline required. In this example, we're making it compulsory. We're saying that $400 difference between the 30-year mortgage and 40-year mortgage is getting stowed away. It's getting invested. 40 years.

Rory: Yeah, absolutely. It's an example, right? And this is still showing what is possible. It can be done. And I think at the end of it, we'll get to the end of it when we get to the end of it. We'll start at the beginning.

Daniel: So let's crunch the numbers out then, Dan.

Rory: Yeah, a hundred percent. But let's start off with obviously the two different mortgages.

Daniel: So, we're doing an $800K loan over 40 years option, over 30 years option.

Rory: Okay.

Daniel: At a 6% interest rate. So we're assuming the rate's 6% the whole time. Obviously, it's going to be fluctuating, so we just use an average rate of 6%, which I think is relatively conservative. One has a repayment of $4,401. That's the 40-year mortgage, and the other one has a repayment of $4,796. So that's where we're getting the $400 difference. Biggest thing to highlight that would make people cringe: you are paying a difference of $386,000.

Rory: Correct.

Daniel: Interest more. You're paying more interest. Doesn't that make you want to throw up on the 40-year?

Rory: Not necessarily, Dan. So the whole point of this is actually same people, same house, and we're at point A now deciding on a 30-year or 40-year term. In 40 years' time, both scenarios are the same in terms of the house as mortgage free. And the difference is what have we done with that $400 a month? That could impact us in 40 years' time, which is invest it. So if you invested that $400 every month, so monthly you've got an automatic payment going to Sharesies, the growth fund, straight into the S&P500, or wherever you want to put it. And we've assumed an 8% interest rate, which again, I think is, that's very conservative.

Rory: It's conservative enough.

Daniel: So accounts, you know, fluctuation, tax, 8% is very conservative.

Rory: Yeah, absolutely.

Daniel: And as an average rate over time, because you could, obviously at the beginning you could afford to be a lot more aggressive and take risk, but over time you might reduce your risk. So 8% is a good average. That $400 monthly over 40 years comes out at just shy of $1.3 million.

Rory: Oh my God.

Daniel: So in 40 years' time, you've got a mortgage-free home and $1.3 million in the bank in your KiwiSaver. So that's not a bad, that is not a bad nest egg.

Rory: Hang on, hang on, hang on. So you've put $400 in and you're exiting with $1,296,000, almost $1.3 million.

Daniel: That's right. And your total inputs, $192,000. That's just what you put in for your monthly payment for this annuity.

Rory: That's insane.

Daniel: That's wild, aye? That's the power of investing and that's compound growth. And we always talk about on this podcast, like the power of compound growth. Once you're getting above that 30-year mark in investing, it's like insane.

Rory: I mean, it's not even possible for me now because it would take me through to 80 and I'm not going to be investing $400 a month.

Daniel: This is what a 40-year mortgage is all about, people are living longer now. You can do it. We're going to, you can do it. Come on. We're going to be clocking here at Blueprint in your seventies.

Rory: I'll still be here servicing the book. The legacy clients.

Daniel: That's right. So don't worry about that. So you are paying yours on a 30-year term.

Rory: Okay, but I paid mine off early though.

Daniel: You're paying it off early. 10 years quicker, I'm debt free.

Rory: And then now I'm debt free. I can take my monthly payment and invest it.

Daniel: Okie dokie. So $4,800 and compared to $400 a month, surely I'm going to outpace you, isn't it? Because now I'm putting in $4,800 a month straight into my savings and I got no debt. So it's the same repayment.

Rory: Your investment.

Daniel: Yeah, my investment. So you've got a 10-year time horizon now, and you're going to go max out your $4,800 a month? What's your nest egg? Okay. I've got the number here. So I'm doing, for 10 years, I'm doing $4,800 at 8% return. I'm only ending up with $870K.

Rory: It's wild, isn't it?

Daniel: That's crazy. And like logically as a financial adviser, it's quite upsetting because you're like, pay off your mortgage quicker. But here we are, it speaks for itself. I've got less money in retirement.

Rory: You are over $400K better off, isn't it? But you paid way more interest than me.

Daniel: You paid $400K more interest to the bank.

Rory: Yeah, but the investment, that long-term investment.

Daniel: And you actually got, and you end up $400K better off, is it? What's the actual figure? We've got it here.

Rory: $426,000. You've got more in cash. We both live in the same house. It's 40 years down the track.

Daniel: But you paid more interest than me.

Rory: I paid more interest, but I invested earlier. It's crazy.

Daniel: So what's wrong with debt? It's not necessarily that bad and interest is not necessarily that bad, but investing is the key here, aye?

Rory: A hundred percent. I think the takeaway here is that you've got to, you've got to be investing. Even if you are paying off your mortgage, like where I would have beat you is if I paid my mortgage off in 20 years. I definitely would have beat you then, you know?

Daniel: I beg to differ.

Rory: No, of course. I would have beat you if I paid off my mortgage and because now I've got 20 years of investing. But then if we take the difference in the repayments that you would be paying in those first 20 years and I invested that early.

Daniel: Okay. Now we're investing a thousand dollars a month.

Rory: Okay. So we'd have to crunch those numbers.

Daniel: I get what you're saying. The jury's out on that one, Dan.

Rory: Okay.

Daniel: In that example, we would have to take into account how much you are investing on top, because you'd be matching me, right, with a monthly repayment, but...

Rory: Okay. I get that. I get that. So I'll give it to you, man. Hey, look, but I think there's so many variables we're not considering here, right? All we're assuming is we've got a term, a debt sum, repayments and investment. And there's a risk in terms of not actually making those investments. You're not going to not make your mortgage repayment because you're going to be out on your butt. That requires a lot of discipline to be putting for 40 years.

Daniel: Exactly. And it's something that we know that Kiwis aren't very good at, but it's worth highlighting that but we, first of all, we should be investing. And secondly, a 40-year term's not such a crazy idea. If you have the discipline, if you have the big if, I'll a hundred percent give you that. But for the everyday Kiwi who doesn't have the discipline to put away on top of their mortgage payment, it's not.

Rory: Let's draw the line in the sand. You know what I mean?

Daniel: Absolutely not. So let's agree on that. If you are diversifying and investing, with that extra money, that $400 a month, it's worth it. But if you don't have that discipline, then it's not going to work. Even if you take those first couple years off, these numbers are way out because of the compound growth, you know? Because of how important it is to invest early.

Rory: Absolutely. And I think, diversify your investment. So like one for Kiwis, so often the vehicle to wealth is the house. And it becomes the home. And we've spoken about off air that the home is not an investment. A family home is not investment. It's just a roof over your head. It's the most important asset. It's the least important investment. Because when you come to retire, you stop earning. You can't sell a bedroom and live off that, right?

Daniel: That's right. You can't, so you can't realise the capital in your home unless you do a reverse mortgage. But that's in no way endorsing the reverse mortgage.

Rory: No, that's right. I mean, like we're talking about $800K loan and it's $4,800 on a 30-year term, let's not be too quick to get to that $1.2 million loan and that $6,000 payment. Invest that money. Diversify. Because we know that early investments over time are going to increase that nest egg and you need that cash, right?

Daniel: You've hit the nail on the head, like the family home. We can't realise that income unless you're downsizing.

Rory: Right. We can't realise that asset until you retire, assuming that you can't, because you want to stay in the same home when you retire. So we need to invest, we have to invest. These options like this, options like interest only if you're a property investor, they make sense. But they have to be used with sound financial advice and sound strategy, and they require discipline.

Daniel: Absolutely. Discipline's the key to everything, aye. In summary, get the right financial advice. Don't just go in and sign up a 40 when they come.

Rory: Yeah, don't just go and say, oh, 40 years sounds good. You know what I mean? Don't go sign it up. Get your annuity calculator out first. Plug the numbers, have a chat to your adviser and make a plan that makes sense, rather than just saying, oh, 40 years sounds good. Because it's no good just paying extra interest. But it can make sense like this option here. It can make sense.

Daniel: Yeah, that was a fun episode, Dan.

Rory: Awesome. Cheers guys. Thanks.