E22 - The Truth About Interest Rates (Why You’re Optimizing the Wrong Number)

Interest rates don’t matter.

At least not the way you’ve been taught they do.

Most financial conversations revolve around APY, refinancing for a quarter percent, or chasing the highest yield savings account. But while consumers obsess over rates, banks optimize something very different: volume, velocity, control, and capital reuse.

In this episode of Before the Returns, Jaden breaks down:

• Why most 30-year mortgages don’t last 30 years
• How loans are frequently sold and transferred
• Why refinancing resets the fee clock
• And why the system relies on movement—not patience

More importantly, he shares a personal story of choosing lower returns with higher control — and why that decision felt empowering.

This isn’t anti-investing.
 It’s anti-optimizing the wrong metric.

If you’ve been focused on rate instead of control, this episode will change how you see money.

Key Takeaways

• Most 30-year mortgages are paid off or refinanced within 7–10 years
• Loans are frequently sold into secondary markets
• Banks optimize volume, velocity, and reuse — not just interest spread
• Yield without control creates fragility
• Control creates optionality and opportunity
• Returns follow structure — not the other way around

Listener Reflection Questions

• What number do you optimize first — rate or control?
• Can you access your capital without penalty or permission?
• Are you thinking like a depositor or like an owner?

Learn more at www.jadenzubal.com | Follow @jadenzubal | Join the *Before the Returns Weekly* newsletter

📩 Questions or ideas? Email: jadenzubal.wealth@gmail.com

⚖️ Disclaimer: This podcast is for educational purposes only. It is not financial, tax, or legal advice. Always consult with a qualified professional before making financial decisions.

Transcript

SPEAKER_00: 0:00

Interest rates don't matter. At least not the way you've been taught they do. If you're saving for yield, rates are everything. If you're saving for control, the rate is secondary. And most people have been taught to optimize the rate instead of asking who controls the capital. I've made decisions where the internal rate of return was lower, but the control was higher. And I would make that decision again every time. Hello and welcome to another episode of Before the Returns. I'm your host, Jaden Zuball, and today we're really going to talk about interest rates and this obsession that exists around them, the impact that interest rates have on our lives, and the times when rate is not always the most important thing that we need to focus on. So thanks for joining the show. And if you find any value from this episode, please consider liking, subscribing, and sharing. Really helps grow the channel, and we appreciate all of the support. Okay, so let's just talk for a moment about this idea of rate obsession out there. Everywhere you look, you go to take an auto loan, you take a home loan. We hear about it all the time with buying homes today. We hear about this idea that back in 2020 you could get an interest rate of 2.5%, 3% on, in some cases, a 30-year mortgage. Right now I'm doing a couple of loans on some rental properties that are in the sixes. And I know people, in fact, I just met with a client this morning who has an interest rate on his primary residence of 8.5% just because of the timing of when they purchased. So rates are all over the place. We're pretty rate sensitive today to how things look. And it's a almost an everyday conversation that I'm having with people. So if rates are high there, the other side of the conversation is well, we've had high interest rate savings accounts that have existed today. You can get CDs with good rates. There's all sorts of things that benefit you when it comes to the rate environment as well. Right? But this is just added to the conversation of how important rates are. And for the most part, we can't really get it out of our heads. It's just it's everywhere. Rates are the topic of conversation all the time, especially in my world. We're talking about financial strategy and planning and all these things every day. Rates consistently are a huge part of the conversation. Now, I said at the beginning that interest rates don't matter. And what I really mean by that is that we have too big of an obsession over interest rates and we forget the big picture. We forget why or when they actually matter, and when we should maybe sideline the rate conversation a little bit and really look at what the big picture is. Do we have control of the environment? Do we have control over the choices that we're making with our money more so than how important the rate is? So we're arguing all the time over a quarter of a point, a half a point, right? What is the Fed going to do next with interest rates? When in reality, the big picture, look back at what the banks are doing, look at what big institutions are doing, and it's not the rate that matters as much to them. It's more how often can we move the money? Can we move it around? Can we keep velocity happening? What do I mean by that? Think about it this way. Let's look at, I always tell people follow the money. So when you go out and you go to get a mortgage, and you look at 30-year fixed rate mortgages and you compare that to, say, 15-year fixed rate mortgages, and the interest rate on the 15-year is lower. And in most cases, you're going to be quoted a lower rate on the 15 than you would on the 30. Why is that? One of the reasons is that for the bank, it is better to have that money out for less time because they can move the money more often, they can get it out into new loans, and they make more of their money on things like origination fees than they do on the interest rate of us just carrying in the loan forever. So it's not necessarily advantageous to a bank to put a 30-year fixed rate loan in place. And statistically, they certainly do not expect you to actually keep that loan in place. If you look at the statistics for 30-year fixed-rate mortgages, it is only a seven to 10-year timeline for most people before they either refi, sell. In some way, the loan gets paid off and shifted to a new thing. So it's already built into the system that they expect it to work that way. But they're still going to incentivize those shorter terms on the loan, a 15-year over a 30-year, because then that just helps them to ensure that they do in fact get to move that money more often. So it's the money movement that matters more than the interest rate when you're talking on an institutional level. Then diving even just a little bit deeper here for a moment, when you set up your 30-year fixed rate mortgage, how many of you have also, let's say you set up the loan, and a month or two down the road, you get a letter from the bank that says, hey, we are transferring your loan to another servicer. So somebody else is taking over the loan. You'll now make payments to them. So really what that means is the bank that you set up the loan with or the lender that you worked with, they made their money. They got their origination fees, they got all of the setup costs on that loan. They are now transferring that loan or selling that loan to somebody else to service your loan. So now somebody else takes over, which means the loan really just gets packaged into investments for somebody else to handle. And again, when that happens, there is a built-in expectation that many of those loans are only going to last seven to ten years. And so it's that money movement, it's things happening all over the place that they really are relying on. They're not reliant on that interest rate. That's not what's making them money. In fact, in many cases, that interest rate is not really enough for them to be profitable. And it's just not the winning ticket. It's money movement. So, how does that apply to us, though? What it means is that we, as consumers, have been trained to think like depositors or renters of the system rather than owners. We've been trained to take our money, deposit it in the bank account, hope that we can get a decent savings rate on that. We can use those high-yield savings accounts, we can use the CDs, we can use whatever tools that bank might have available to us to get a decent return. And we're just going to let the money sit there, we're going to let it grow and build up so that maybe we have access to it and we can use it for something in the future. So we are a depositor of that money. We're not really owning the system. But what I'm suggesting here is that if we think like a bank for a moment, if we think like the institutions that make a whole lot of money off of our money, I'm suggesting that we consider that for just a moment here because whether you like the banks, whether you hate the banks, you detest them, whatever. Fact is, they do use our money to make money. So it's not a terrible idea to consider what is it that they do that works so well, especially if they can loan out the money for three, four, five, six percent, and somehow they're still making money. That would suggest to me that they are not making money specifically on the interest rate. So I ought to consider the same model, right? We ought to consider it's probably not the rates that are the biggest win here. So how do we apply that to ourselves? The way that we do that is instead of asking the question of what's the rate, we should be asking, can I access it? Does it keep growing when I use it? Can I actually reuse the capital? Because that's what banks do. They, if you listen to past episodes of me talking about this, or if you've heard other people talk about fractional reserve banking, the banks are able to take your money and they're able to loan it out multiple times. It's this cycle of sometimes your thousand dollars that you deposit gets loaned out nine or ten times. So nine or ten thousand dollars loaned out on your original money. So how can we apply that to us again? Can we reuse the capital? And do I need permission to do anything with it? Do I need permission to use the capital? So the rate is a feature, but the strategy is control. Okay, I'm gonna say that again. The rate is a feature, but the strategy is control. And this can be a really hard concept to grapple with because we are firmly trained to consider the rate in all situations. It is across the board. What kind of rate am I getting? Am I earning a decent rate? Am I paying a bad rate? Everything is so rate-oriented. If you look at marketing for auto loans and mortgages and CDs and all these things, everything is big highlighted. Here's the rate. The rate is what people think about, it's what they care about, it's what matters in their mind. And the banks know that and they take advantage of that. There can be little shifts in rates, that's how they bring in more money, and then they just do what they do best and cycle that money and use velocity to actually make it do something powerful and useful for them because it's all the fees and the penalties and all the little things that happen in the background that make them just as much, if not more money, than the actual rate that they might be charging you. Early on in my investing career, I did the same thing. I cared very much about rates. Rates were always the topic of conversation. In fact, I can remember when I bought my first rental property. This was back in 2016, I believe. And back in that time, I want to say rates were around five, five and a half to five point eight percent on that first property that I purchased. And I remember thinking that was just a horrible rate. Like it just was, it was so high. And it was just going to cause problems, and the property just wasn't working. And I remember as rates started to come down over the next couple of years, I kept thinking, uh, maybe I should refinance, maybe I should refinance. In the end, though, the rate didn't really matter that much in that big picture. That property performed just fine, regardless of the rate, did everything that I wanted it to do, cash flowed, but worked well. It's not that cash flow couldn't have been better with a better rate, but making that investment was not rate dependent, right? As it it never should be, and I just didn't understand that at the time. I felt like it was rate dependent because now I compare that to today. We have some properties that we just picked up last year, and those properties are going to be around a 6.5% interest rate, and I'm super stoked about it. Like it's a great setup because the property works independent of the rates. We set up the right deal at the right time with the right people and the right structure. All of that meant that we can work with whatever rates we're dealing with in today's environment. So the rate can matter, but it should not matter when you're making these type of choices. You need to have control over the system, control over the strategy, and then let the rate just be a bonus on top of it all. So I stopped asking what is the rate that I can earn on something, or what is the rate that I'm paying? And I started asking questions more like, what does this enable me to do? I was on the phone about a week ago now with a real estate developer, somebody that I respect that has done this for quite a while and been quite successful with it, and often borrows money for different developments and things that they're working on, borrows money in the 15% interest rate range. So most people would fall out of their chair when they hear that. Oh man, I have to pay 15% on this money. 15% is not a big deal in that environment because there is plenty of profitability. The system is predictable, and the developer has control over the outcomes and works well within the bounds of what they know they can do. So they're able to comfortably pay the 15%, pay the lender back at the end of whatever term they set up, and the 15% doesn't matter. And in another conversation, talking to a gentleman who is paying 18 to 20% on money because it's a little bit higher risk deal, but the returns that they're getting are in the 35 to 40% range, therefore, paying 18% on the money is not a deal breaker. That money still enabled them to do the thing that they wanted to do, which they could not have done otherwise if they didn't have the money. So it's good for the investor that's putting it in and willing to take on that risk for the 18% return. And it's great for the business owner because they otherwise would not have access to that money. So all of that is to say the rate doesn't matter as much as what the money enables you to do, as what the control of having that money enables you to do. Because in those cases, it enabled these business owners to use the money for the things that mattered in their business and allowed them to grow their business successfully. So the positioning of my money, when I consider, okay, should I put it in a bank account CD? Should I put it into my life insurance policies and save the money there? Like, where should I actually park the money before it moves to that 12% investment or before I put it into my next real estate deal, before I move to those investments, I'm positioning my money in a safe bucket in a place that I have high control, high liquidity. And so I typically choose to put that into my life insurance policies because that is a place that I have the control and the liquidity and it's not rate dependent. I'm not really concerned about the rate there. What I'm concerned about is the access, the control, the stability. Is the money actually going to be there when I need it to be there? And am I going to have access to it and be able to pull it out? In the real estate deals that we've talked about, in the ones that we just did last year, if I did not have access and control of that money, I wouldn't have been able to do those deals the way that I did. Neither would some of the investors that I've had work with me on some of those deals, because a lot of them use the same tools and use the same strategies. And what they're doing is borrowing against that life insurance when the opportunities come up, putting their money into the investments, and then they get to use the money more than one time because the money's growing in the background and they're still accessing it and using it for the investment. That's that is a huge win because that's what the banks are doing. They are not rate dependent, they're focusing on velocity, they're focusing on that movement. So if I can both get a little bit of a return on the money and still be able to use the money for other things, there's where we start to see a real win because now we've taken control of the system, we've built a strategy, and we put the money to work. So what this really means, at least in my world, is I wanted to stop locking money up in the 401ks and the IRAs and all these tools that are sold as hey, earn a nice long-term, let's call it 7, 8, 9, 10%, right? Depending on who you talk to, the promise is always a little bit different. But you can earn that return. And they talk about time in the market beats timing the market. I don't disagree with that notion. I understand that time in the market is certainly better than timing the market. However, what I disagree with is locking up huge portions of our money where we don't have control. Taking control of the money to some extent can make a huge difference on that outcome. So shifting gears a little bit though, show me someone who is dialed in and just cares about the interest rate on something, and I will likely show you someone who does not feel in control of their financial situation. They don't feel like they are able to make moves when they want to make moves, and they're able to get the outcomes that they're hoping for. They're actually working towards their goals. So today's conversation isn't it's not about being anti-interest rates. In the end, rates do in fact matter, but only in the right context. They don't matter in the context of let's just shoot for the highest rate that we can possibly get. That is missing the point. And that even hits on this idea that we're told to just put our money into our brokerage accounts and our IRAs, 401ks, crypto, whatever, and shoot for big returns because as long as we're in the markets long enough, we can offset the bad years, right? And there's some truth to that. We can do that. And I fully believe in diversifying your portfolio. But if you also believe in diversifying your portfolio, you have to add in other things that actually give you control and that don't just focus on interest rate. If that is our only focus, we are likely missing out on some big opportunities. Think about it like this for a moment. Some of the wealthiest individuals in the world, like let's just think big picture. Let's talk Bill Gates, Elon Musk, Warren Buffett, all these big players. Are they invested specifically in the stock market or are they business owners whose companies happen to be a part of the market? Warren Buffett's a good example. Everybody thinks of him as a Wall Street market guy. Really, what he is, he's a business owner that just buys such significant amounts of stock in companies that he now has a controlling interest of that company. He can make decisions and he can influence outcomes of companies. So what he's really doing is not focusing on the rate of return on that stock. He's focusing on control. If I buy into it enough, I'm going to have some control. Therefore, I can influence outcomes. So again, these big players, they're not worried about interest rate. What they're worried about is do I have control of the places that my money ends up? So back to the beginning. We were talking about banks. Banks do that. They care about control, they care about velocity, and they care about this money movement idea. So do the big players. So do the people who create real generational wealth care about control more than they care about interest rate. And in the cases where they are just shooting for a big interest rate, it's typically with a portion of their money that they would be okay losing if it came down to it. So in my mind, a lower return with higher control matters more in many cases than a higher return with lower control. So as you're out there thinking about your money and your financial life, take a moment and just consider how much control do you have over your financial picture today? How much influence are you able to have on the outcomes that you're getting? And just as a little disclaimer, like this podcast is educational purposes only. It is meant to give you things to consider and think about in your financial life. Don't take this as financial advice all by itself. It's something that you really should sit down and talk with your strategist, your financial planner, your advisor about. But I think it really is important to consider control. Like you need to have control over your financial picture before you just consider, let me get the highest rate that I can possibly get. That is not a strategy. If you enjoyed this episode, again, please consider liking, subscribing, and sharing, and follow along for more episodes like this.