the method is an amazing thing it teaches people how to pay less interest to their mortgage and get out of their mortgage years sooner without making more money or spending less and it all comes down to this concept agree or disagree this is how most Canadians Bank income goes into a checking account expenses come out of the checking account whatever is left over moves into some sort of savings vehicle yes okay if you had to answer the question why do you do it this way true or false the number one answer on the board if we were playing family feud would be because that's what my dad taught me right that's what okay because when you force people to answer the question why do you do it this way they're like I don't really know I think my dad taught me right and the reason that they don't know is because they've never thought about strategy and how strategically this actually makes sense cuz it doesn't right like what benefit is there for us who benefits from this the bank benefits because your money in a checking account doesn't make anything and if you're happy about what your savings account makes and you go to problem and I can't help you okay because we don't make any money with our checking account or a savings account but the bank does because they have access to all of your money and as long as it's there when you need it they get to leverage it in the marketplace and they pay you how much for it nothing okay so we have to move people off of this and I would suggest that what you need to do is teach people the power of a line of credit a credit card and a mortgage because when you put these three accounts together you start using your accounts differently you get way further ahead it's so simple right your money your money banks money banks money banks money so how do these three accounts behave together in a way that can empower your clients to get out of their mortgage sooner build equity four to five times faster some of you I know are thinking I don't want my clients to pay their mortgage off sooner we're two reasons number one than their mortgage their renewal will be less and I'll get less and number two I work with investors so I try to get people to leverage the money out of their house either way would you agree building equity is better than not building equity yes so we want to build equity as fast as possible people are working hard to put money into the mortgage they need to be getting a benefit for it and we can accentuate the benefit you can accelerate the pace with the same money that's like miraculous really and that's how it comes off to people when you first teach them so I want to show you why and I'm going to do the quick version of why these three accounts are so powerful for the consumer then I'm going to show you how to put them all together and make it work for people and I'm going to use the average family to income earning family and the average mortgage and so on so I can put numbers to it and bring it all to life for you now caution here is this you guys have got to now just look at the example I'm going to do and avoid the temptation to start trying to run your own numbers or your clients numbers while you're here because if you just get the concept here you'll have the video to reflect on okay so you can go back and watch it again but I just want you to get the concept because if you do you can master the solution later but that's not what you need to do I'm only here once so I want to get it to you and give you your questions answered and so on because I know what they're going to be because I've done this like a thousand times and the questions are always the same okay a line of credit charges simple interest we like that really good simple interest is like friendly the best place to carry debt is a personal line of credit charging simple interests okay it's just the way it is a credit card charges compounded interest and so does a mortgage as you know twice a year for the mortgage here and twelve times a year for most credit cards okay the other distinguishing features that you have to understand are going to play to or against our advantage as a consumer is that the line of credit charges interest once a month and it charges interest remember distinguished personal line of credit unsecured versus secured home equity line of credit I'm not talking about that I'm talking about a personal line of credit unsecured okay the credit card or the line of credit charges once a month and it charges interest based on the average daily balance at the end of the month okay this is an interesting concept but it's really powerful for us here's how it works if you start with a balance up here and you end the month with a balance up here but throughout the month you're down here and here and here and you end here even though you started the month with a high balance and ended a month with a high balance you pay interest somewhere in here the average daily balance the way the interest is applied is huge in this because a credit card is different charges interest every day and a mortgage is the same charges interest every day compounded twice a year so they're not created equal in the example I'm going to show you you're going to notice right away that I'm going to set the mortgage interest rate at a lower rate than the line of credit and then I'm going to tell you to leverage money from the line of credit to the mortgage and the obvious question is why would I do that well it's because the two aren't created equal they don't charge interest the same way they're two totally different animals but people don't know it that's the trickery and the banks are doing it every single day and people don't know because how many people read the fine print right they just don't it's all written there it has to be but people don't understand okay so that's what you need to know about the three accounts I'm going super fast but here's I'm going to get right into the example because I'm hoping you're going to catch it and if you need more like a deeper explanation go to the video okay so the average to income earning family in Canada makes $6,000 a month that's net okay and spends $5,000 a month okay leaving a thousand dollars what we call discretionary income they can do with whatever they please and the average mortgage in Canada is two hundred and twenty thousand dollars now you guys are all mortgage brokers so you know this all depends on what source you you look at okay so and so don't question me on the number just trust me that any number you're going to get is going to be relative trust measures that's another five minutes right there okay so 220 okay and the average interest rate for a fixed-rate mortgage over the last 15 years is five point one five some are you're going to say in your head why are we using that number well because today's numbers are atypical right so to use them would actually flattered me right now but it doesn't make a lot of sense to the average customer because a mortgage isn't going to get paid off in the next five years it's going to be 10 15 20 years so we're using average rates over the last 15 years and the most popular amortization I'm sure you'd agree 30 years that mortgage has a payment of 1193 89 a month how much interest do you think this mortgage will charge or accrue over 30 years at that rate total Yellen oh oh I told you earlier that's a big leg that's an aha moment in there anyways five more minutes gone the clapping would anyways okay so if you have three accounts that's like the biggest aha moment of the whole show it really is people are like fifty thousand like how many think higher how many think lower and then I'm like two hundred nine thousand are like ah and they're they're locked right anyways we'll just move on I had my moment here's a credit card line of credit mortgage you guys are much more lively today this afternoon than you were this morning as a Vancouver thing okay so eleven ninety three eighty nine is the mortgage payment and remember the discretionary money is a thousand dollars every month so this family okay without making more money or spending less will earn about twelve thousand dollars more this year than they spend with me okay but most people agree or disagree overestimate what's coming in and underestimate what's going out would you agree so what we do all the time when we're trying to calculate for people how to execute the system is we knock off 25 percent of the discretionary income so if you say it's 12 for the year I'm going to assume it's nine to be safe that's a prudent thing to do something you should definitely take into your own business just be safe because people really you know they get it they guess wrong okay so what I'm going to do is I'm going to tell this person they have to listen to me for one year do what I say okay and after that so two guarantees number one they will there's no way mathematically they can be worse off than they were than they would have been if they hadn't a year from now and in a year they get to decide if the results were good enough to keep them going with me okay and they always say yes and it's great so I'm going to tell them here's what I want you to do I want you to borrow $9,000 from your line of credit today and I want you to pay it to your mortgage as a lump sum payment so you have a two twenty thousand two hundred twenty thousand dollar mortgage and it now becomes two hundred and eleven thousand you with me okay we all have to agree before I move on do we have more debt less debt or the same debt as we had five seconds ago same that okay we have the same debt right we just shifted that now where we shifted that was we moved that from the most aggressive place to the least aggressive place now we have a problem here a new problem the 9,000 I will deal with that soon but first I want to show you what just happened here because this is dramatic so what happened there I'll come back to this sheet in a second a mortgage is like a set of steps I tell people 360 steps is third earth is 30 years in months okay and how it works is this every month you make a payment and there's an interest payment that goes with it okay on this particular mortgage in month one it's like I think 930 dollars of interest in month two this is the really exciting part it's like nine hundred and twenty nine dollars of interest month three you get the pattern so we need to show this to people because it would take seventeen and a half years before half your payment would be principal and half your payment would be interest if you just go at this pace would you agree most people are just going at this pace they're just paying their mortgage what they're doing and then they get resigned to being in debt forever because after a while here's what happens you buy your first home you're so excited you're so happy to be in the more in that in the house you don't care about the interest till five years later you go for renewal and you're like so wait a minute I paid like seventy five thousand dollars of payments I have seventeen thousand dollars of equity really yeah like so what happened like well you weren't paying attention actually and the mortgage is front loaded with interest so it's killing you and now you've got to pay it so they're like okay well just give me the equity that I have and just bump it right back up that's the pattern that people get into because they don't understand it and they get resigned to being in debt forever would you agree fair experience like that's what people do and we can stop it so what we want to do is show people that if they were to make that lump sum payment what happens is in this case they're going to skip 33 months on their amortization schedule by making this $9,000 payment here so what happens is you go from month 1 to month 33 on the am schedule and every interest payment that you every payment you skipped you cancel the interest payment because it'll never get there in the first place you see its lifetime interest over the mortgage and you've eliminated it which means for making the $9,000 payment to the line of credit you have just saved this client $29,000 a future interest that will never get there in the first place it's like Eastern medicine for your mortgage preventative right we don't treat the problem we treat the we don't treat the symptoms we we get at it before it gets there so now you have a mortgage of 211 you've saved the 29,000 you made basically an investment of $9,000 right which like you'd have to go across the hall to the casino and get really lucky to ever get that kind of return okay and it probably wouldn't happen for most of you so don't do it but the $9,000 is your new problem but it's such a light problem let me show you how it works here's the change we're going to give to people for their day-to-day banking okay so what we're going to do is we're going to tell them no more checking account because the checking account sucks what we're going to do is we're going to turn this into your new savings account this is where the extra money goes the 9,000 every year and what's nice about this is once it's in the mortgage you can't get it out like that's a good feature it's a good disciplinary feature you've transferred to the mortgage mortgages closed-ended can't get it back unless you come see me and pay money to refinance it which you're probably not going to do so that's good now the 9,000 how we deal with it think of this is your new checking account and we're going to do is st. listen let's put your income into the line of credit now okay because the line of credit is whose money yeah it's the banks so what we're going to do is when this family gets paid say $3,000 there's every two weeks remember they make $6,000 take home the $3,000 is going to go in here and drop this to 6000 and then two weeks later it's going to drop it down to 3,000 remember this account charges interest on the average daily balance so if there was no expenses which is obviously unrealistic this account would be at 9000 on day one of the month two weeks later would be at 6000 and two weeks later be at three but there are expenses and for this family it was 5000 but we have a brilliant solution for that too it's the credit card because credit cards give us 30 to 45 days no interest which means I can loan myself $5,000 of my expenses and pay things by credit card and let's agree it can't be a hundred percent of your expenses but probably ninety five can be paid by credit card today so you accrue the expenses here and on the last day of the month you going to go online and you're going to transfer five thousand dollars from your line of credit to your credit card you're going to pay no interest here and you're going to get your points which is great and here you're going to end up with a balance of $8,000 at the end of the month 1000 less than you started with what's amazing about that is all you did was take the same income put it into a different account right you made a thousand dollars more than you spent each month and what's going to happen here is that month over month over a month this is going to get to zero it's probably going to take you nine months nine to 12 you got a little buffer in there so remember I said you got to trust me for a year I'll show you what I can do for you inside of one year well inside a one-year you're going to get to zero here and you're going to pay some interest along the way but the average daily balance here because you're not putting the expenses here is going to be much less than $9,000 but let's say it was nine thousand just for the sake of argument it's simple interest at six percent nine times six is five hundred and forty dollars a year in interest to carry that balance and break it down what's brilliant about it is that as you break the money down as you pay this that down the money is available to you again as a line of credit as a safety net if something happens in your life where you need it but at the end of the year if I said to you this is going to cost you five hundred and forty dollars to save twenty nine thousand here would you take it every day and twice on Sunday by the way this is where everybody claps yeah that's a good thing okay so how this plays out is that if you did this right so you'd get to zero and then what we would do is we would do the formula again we would take monthly income less expenses for the next twelve months right like things are going to change so you have to kind of help people through this every year great reason to get in touch with them and so on and you're the reason why they're doing this they start to love you they really do not all then we're going to stay on the horse but they can get back on at any time the idea is this income less expenses less twenty five percent gives you the amount to to transfer to your mortgage as a lump sum payment spend the rest of the year paying it back okay and if you do that right what you've done is you've used the bank's money to pay the banks interest and offset future interests it's very powerful at the end of the day if you did this year in and year out your mortgage would be paid off in 12 and a half years and you would pay seventy six thousand dollars in interest savings of a hundred and thirty five thousand dollars in interest you never really need it to pay to make sense yeah so that's the method in machs feed this is made for the average person do you all have clients that are just like highly disciplined with their money right that person should just get a line of credit and pay it off at their own pace because they will but the most most people won't if you give them a HELOC you know they'll pay the interest they get used to paying the interest they'll have great intentions and probably not actually pay it back so this it's there's some built-in disciplinary forced in here right so I make that line of credit kiss it goodbye it's gone you can't get it back now Manulife one for example is another popular question I guess sounds a lot like Manulife one and it kind of is except it's like Manulife one on steroids because here's how it works Manulife won the challenge is I've ever had people call you on a Saturday morning and they're like hey we're in the area and you're like ready and so you stuff everything in a closet close the door everything's cool and then when they leave you open the door everything pops right back out right so that's kind of Manulife ones effect because what they do is they throw everything in here and they tell you right it's not a bad product it will save you money but relative to what I'm showing you it'll save you this when you could save this so what'll happens they'll say put all the money in here and when your income goes in there every time the income is just sitting there it's saving you interest which is true every time you need money where do you have to go you're going to other source right you got to you got to take it out of here and that's real life the other problem I think with manual life is just that you're restricted to manual x products they raise their rate you're screwed right there's no flexibility not good for us right but also not good for them so at the end of the day this you know this this solution called the method it's really powerful for the every man and every woman okay makes sense people say sometimes what happens if you know smart guy I do this system I borrow the nine grand and then I lose my job tomorrow that's a great question and what would happen is well nothing would happen because you know what we would call that right that would be I'm not going to say it but now you know what you know would you say if you were down right so if life had you down and now you don't have a job would you rather owe to 20 here or to 11 here and nine here we're like the lesser of two evils is here right I'd rather not owe to 20 here while I'm down and can't pay bills then Oh to 10 or to 11 here and nine here because at least the nine is charging me a little less aggressively buy me a little bit more time life happens can't change that but at the end of the day all this is is a more efficient way to do your banking if you've been taught this when you're growing up this is what dad taught you and then I got up here and tried to show you this brand new system called checking account saving - can you just laughed me right out of the room I go right back to Toronto tonight so it's just a more efficient way to do it and so it falls right in line with everything I said earlier today value it's valuable right communication how do we teach it that's going to be your biggest challenge you can watch me online 50 times it might take you that long to learn how to teach it took me two years to learn how to teach it effectively and I went $100,000 in debt but I didn't have someone to teach it to me so you guys are going to be further ahead okay and then efficiency this is more efficient which makes it valuable okay any more questions hi there it's Clark it um so should I be putting instead of my RSP money and my TFSA money into my line of credit into your personal life data and then pain down my mortgage what a question that's a great question I think you know the answer really is it depends because it depends what your money is invested in in the rsps if your money was invested for example if you were my client I would tell you to invest the TFSA and the rsps in mortgages right and then your returns going to be eight nine ten fixed no fees brilliant but if you're invested in mutual funds or something like that where it's volatile and so on and you're getting two or three percent a year you're going to get way more way more advantage by saving the interest on the mortgage that said there's so many other factors to consider taxation all that right so it all factors in so each case is going to be different not trying to squirt the question but I really don't know until I had the whole picture right which is why we have to communicate well get all the data all the information assess the whole picture and your client will love you for it too because that's a tangled web of a question to try and answer but it's all math so it's fairly easy to find the solution round of applause for Chris thank you so much you
