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A beginners guide to refinancing your home loan · She's On The Money

0:00
Speaker 1: She's on the Money. She's on the Money.
0:23
Speaker 2: Hello and welcome to She's on the Money, the podcast
0:26
Speaker 2: for millennials who want financial freedom mortgage refinancing, How do
0:31
Speaker 2: we do it? How can it help us financially? And
0:33
Speaker 2: what are the costly mistakes homeowners continue to make in
0:37
Speaker 2: this space. My name is Georgia King, and joining me
0:40
Speaker 2: to reveal all is, of course, financial advisor Victoria define
0:45
Speaker 2: V for any unknowing non homeowners like my good self.
0:50
Speaker 2: What are we actually referring to when we talk about
0:53
Speaker 2: refinancing our mortgage?
0:54
Speaker 3: It sounds fancy, doesn't happen, but essentially, simply port refinance
1:00
Speaker 3: is when you transfer your home loan from one bank
1:02
Speaker 3: call lender to a different bank call lender. You could
1:05
Speaker 3: even go from current lender to current lender, but you're
1:08
Speaker 3: changing your banking product and refinancing the loan. That said,
1:13
Speaker 3: the reason you refinance is usually to try and get
1:16
Speaker 3: a lower interest rate or a better deal, or like
1:18
Speaker 3: a sign up bonus or some benefit to actually, you know,
1:23
Speaker 3: putting your loan with another bank or with another banking product,
1:27
Speaker 3: or you could even be refinancing and decide not to
1:30
Speaker 3: refinance completely. You just call up hustle your current bank.
1:33
Speaker 3: Can they give you a better deal because you've threatened
1:35
Speaker 3: the process.
1:36
Speaker 2: Okay, So it's like it's restructuring the loan that we have,
1:40
Speaker 2: be that with our current lender or with a new lender,
1:42
Speaker 2: to score ourselves a better deal.
1:44
Speaker 3: Yes, sir, that is exactly what that means.
1:46
Speaker 2: We've nailed it all right, wrap the end of podcasts.
1:49
Speaker 3: See you guys later.
1:51
Speaker 2: Okay, So saving money is what we're here for. That's
1:55
Speaker 2: that's why we wait. Refinance way, how does it technically
1:59
Speaker 2: save us cash? Though?
2:01
Speaker 3: There are a heap of ways it can save you cash.
2:03
Speaker 3: So first things first, it could and this one comes
2:06
Speaker 3: with a massive caveat, and I'll explain after I tell
2:09
Speaker 3: you what the point is stored. But number one is
2:11
Speaker 3: it reduces your repayments. So that's a money win because
2:14
Speaker 3: obviously the less interest you're paying, the more money saved.
2:17
Speaker 3: But we also need to be really careful because your
2:19
Speaker 3: repayments might decrease over time. But massive caveat just because
2:24
Speaker 3: your repayments decreased. So George, say your mortgage, your payments
2:27
Speaker 3: one thousand dollars a month, and you go refinance you'll loan.
2:30
Speaker 3: You're like money win. It's now eight hundred bucks a month.
2:34
Speaker 3: We need to be really careful about how long that
2:37
Speaker 3: term is score And maybe we're saving money in the
2:40
Speaker 3: short term because our monthly repayments are lower, but our
2:44
Speaker 3: long term over the term of the loan is longer.
2:47
Speaker 3: So we need to just be careful. And I know
2:48
Speaker 3: you're going to ask me later what the downfall is,
2:51
Speaker 3: but I feel like I need to say it at
2:52
Speaker 3: the same time. Is that too cheeky?
2:54
Speaker 2: No, it's good, it's good. Let's really drive it home.
2:56
Speaker 3: Sorry, sorry, sorry. The next is you could pay your
2:59
Speaker 3: home loan office. That's a good idea. Everybody wants that.
3:03
Speaker 3: So not needing to pay extra for additional interest means
3:06
Speaker 3: that you can actually funnel more cash towards your loan
3:08
Speaker 3: and pay off your property sooner. And that kind of
3:11
Speaker 3: links to number one, where you're reducing your payments. Maybe
3:14
Speaker 3: you reduce your payments and what your minimum spend is,
3:17
Speaker 3: so it goes from one thousand dollars a month down
3:19
Speaker 3: to eight hundred dollars a month, but you continue at
3:21
Speaker 3: one thousand dollars a month and you get out of
3:23
Speaker 3: your home loan faster. We love that. We do another
3:26
Speaker 3: reason why people might refinance, and I've seen a fair
3:30
Speaker 3: bit of this recently, is actually debt consolidation, so you
3:33
Speaker 3: might have a home loan as well as like a
3:36
Speaker 3: car loan and maybe a small personal loan. Especially having
3:40
Speaker 3: gone through COVID, I feel like that's a really common
3:43
Speaker 3: thing to have, you know, experienced in the last few years.
3:47
Speaker 3: And as we've spoken about before, making multiple payments at
3:50
Speaker 3: multiple different interest rates might not always be in your
3:53
Speaker 3: best interests, so you might refinance to kind of drag
3:57
Speaker 3: that car loan and that personal loan into your home
4:00
Speaker 3: home loan, so you have one repayment and one debt
4:02
Speaker 3: as opposed to a few with different interest rates, and
4:05
Speaker 3: you would have a lower interest rate across the board.
4:08
Speaker 3: There are obviously, again lots of caveats to that, and
4:11
Speaker 3: you can't always do it, so definitely comb through see
4:13
Speaker 3: if that's an option for you. But that's a reason
4:15
Speaker 3: why people might want to refinance. And ju King, this
4:19
Speaker 3: is the sexiest of options that you're ready. You didn't
4:23
Speaker 3: sound as ready as I wanted to say, girl Ah,
4:28
Speaker 3: thanks George. That wasn't scripted at all. No, we don't
4:33
Speaker 3: script is that obvious, but that sexy option, and I
4:37
Speaker 3: think it is sexy, is accessing equity. So equity is
4:41
Speaker 3: the money that is locked into our home loan that
4:44
Speaker 3: we can potentially access to either invest or renovate our
4:47
Speaker 3: properties or buy more properties. And that is the sexy
4:51
Speaker 3: thing when it comes to a mortgage, right, Like, we
4:54
Speaker 3: want to have a mortgage that essentially is lower than
4:57
Speaker 3: what the property is valued at, so that we can
4:59
Speaker 3: either access equity or just have equity because it is nice.
5:03
Speaker 3: So instead of needing a cash deposit on your future
5:05
Speaker 3: investment property, you could actually just use home equity, which
5:08
Speaker 3: can help you increase your net worth, which Jay sounds sexy.
5:11
Speaker 3: We do have to be careful with it. Again, there's
5:13
Speaker 3: lots of caveats, but that was the sexiest of options
5:16
Speaker 3: and I left it to the last.
5:17
Speaker 2: Foy stunning, Okay, So that's how it saves us cash.
5:21
Speaker 2: I'm going to sound like an absolute sausage here a tweet.
5:27
Speaker 2: I love that word. Can you tell me a little
5:28
Speaker 2: bit more about equity because this is I am kind
5:32
Speaker 2: of new to this idea. How many properties can you
5:35
Speaker 2: buy with one property? What is this?
5:38
Speaker 3: Well, equity is one of those things that I think
5:41
Speaker 3: feels elusive, but once you own property, it's something that
5:45
Speaker 3: you know, after a certain period of time you might
5:47
Speaker 3: have especially in this property market where it's gone up
5:51
Speaker 3: so significantly. Like George, if you'd purchased a property on
5:54
Speaker 3: the Mornington Peninsula, which is very local to George and I. George,
5:58
Speaker 3: you live on the morning To Peninsula, I am from
6:00
Speaker 3: the morning to Finicula, so we know it really well.
6:03
Speaker 3: But if you've purchased it twelve months ago, your property
6:06
Speaker 3: might have increased by thirty percent. Like that is pretty
6:09
Speaker 3: crazy to think that property prices would increase, but the
6:13
Speaker 3: value there is that has given a lot of people
6:16
Speaker 3: who purchased twelve months ago a whole heap of equity
6:19
Speaker 3: in their properties because their properties are worth more than
6:22
Speaker 3: what the loans they have on them are. So that's
6:25
Speaker 3: kind of sexy. So, whether you're looking to invest in
6:28
Speaker 3: property or renovate, or maybe even pay off some debt
6:31
Speaker 3: or pay for something big, or maybe you want to
6:33
Speaker 3: borrow against the equity in your home to buy another investment,
6:37
Speaker 3: property equity is something that, from my perspective, is a
6:40
Speaker 3: super valuable resource. But it's one of those things that
6:44
Speaker 3: I think we need to understand because it's not given like,
6:47
Speaker 3: just because you have a home loan doesn't mean you
6:49
Speaker 3: automatically have equity. So home equity refers to the current
6:53
Speaker 3: market value of your home, which won't necessarily be the
6:56
Speaker 3: price that you purchased it for minus the amount of
6:59
Speaker 3: money that you still on your home loan. So to
7:01
Speaker 3: give you a quick example, because starts gal, but this
7:04
Speaker 3: is in the stat Say your house on the morning
7:07
Speaker 3: to Ninjula is worth eight hundred thousand dollars and you've
7:10
Speaker 3: paid off so much George because she's on the money
7:12
Speaker 3: pays you so well, and you owe three hundred thousand
7:15
Speaker 3: dollars on that property. That's all you've got left to
7:18
Speaker 3: pay off. You're gonna have, or you'll be in a
7:21
Speaker 3: position of having five hundred thousand dollars worth.
7:23
Speaker 2: Of equity in that property.
7:25
Speaker 3: Okay, So you need to obviously keep in mind things
7:27
Speaker 3: like market value. Obviously that can go up and down,
7:31
Speaker 3: so the equity you have might rise and fall. Because
7:33
Speaker 3: if the property market goes down and that property ends
7:37
Speaker 3: up being valued three hundred thousand dollars, you don't have
7:39
Speaker 3: any equity. Does that make sense?
7:41
Speaker 2: It does.
7:41
Speaker 3: So equity is something that you know you could guestimate
7:45
Speaker 3: what it is. You might go, oh, look the house
7:47
Speaker 3: down the street that's of eight hundred grand, but we
7:49
Speaker 3: paid five hundred and only, oh, you know, three hundred left.
7:53
Speaker 3: Then you're guestimating what your equity is. So to find
7:56
Speaker 3: out how much equity you have in your property, it's
7:58
Speaker 3: a good idea to just have a chat to a
7:59
Speaker 3: more mortgage broker who can find you someone who can
8:02
Speaker 3: actually value the property properly, if that makes sense, Like
8:05
Speaker 3: you can't just google it and be like, oh, well,
8:08
Speaker 3: Google said that this is what it's worth. Like that's
8:11
Speaker 3: not helpful.
8:12
Speaker 2: You're constructive because it.
8:14
Speaker 3: Might be different. So with that in mind, I think
8:17
Speaker 3: it's really important for us to understand what equity is
8:20
Speaker 3: and whether it's usable or not. But the thing with
8:23
Speaker 3: equity is you could pull some of that out. Like
8:25
Speaker 3: you can't just go, ah, right, Victoria, I've got five
8:28
Speaker 3: hundred thousand dollars of equity. I'm going to rip that
8:30
Speaker 3: out and use it. But you definitely could go to
8:32
Speaker 3: a bank and be like, hey, mister bank man, I
8:35
Speaker 3: would like to purchase an investment property and they'll go, Geeve,
8:38
Speaker 3: you've got a deposit. You go, no, sir, I have
8:41
Speaker 3: equity and they go, oh, nice, how much of you got,
8:45
Speaker 3: And you'll say, oh, about five hundred thousand dollars worth
8:48
Speaker 3: of equity, and they'll do all of their calculations, and
8:51
Speaker 3: in lieu of a deposit, you might be able to
8:53
Speaker 3: use that equity in your property instead of having to
8:56
Speaker 3: save up again for a house deposit.
8:58
Speaker 2: Right, And so is this how most people by their
9:01
Speaker 2: second and third properties, like they're not saving more deposits.
9:05
Speaker 3: Or sometimes okay, so sometimes yes, sometimes no. I mean,
9:10
Speaker 3: if your property hasn't increased in value and you've only
9:13
Speaker 3: been paying the interest component of a loan off, then
9:17
Speaker 3: you're going to owe what the property's worth and you're
9:18
Speaker 3: not really going to have any equity to use. But
9:22
Speaker 3: in the current property market, yeah, lots of people are
9:25
Speaker 3: using equity, especially you know, I've given the example of
9:28
Speaker 3: the Morning to Beninsula, which is I would say a
9:31
Speaker 3: ninch niche, but I called it ninchhift. No, you know,
9:36
Speaker 3: kind of example. But I think it's one of those
9:38
Speaker 3: things where lots of places around the country at the
9:41
Speaker 3: moment have increased in like such dramatic ways. And yeah,
9:45
Speaker 3: it's not uncommon to use it, but I think that
9:47
Speaker 3: a lot of people, especially if you're a first home
9:49
Speaker 3: buyer and that was such a big stepping stone and
9:52
Speaker 3: it took you like ten years to save for your
9:54
Speaker 3: first home, you're not even going to think that another
9:57
Speaker 3: home might be closer than you think it is. But
9:59
Speaker 3: it could be very lucky, very privileged.
10:02
Speaker 2: But we love that for our community indeed, And is
10:05
Speaker 2: it true that you can also use equity for renovations.
10:08
Speaker 2: I feel like I've read that somewhere, sir.
10:10
Speaker 3: You absolutely can refinance and get some cash holder out
10:14
Speaker 3: to pay for trades on your house, and banks quite
10:18
Speaker 3: like that because you're increasing the value of the asset
10:21
Speaker 3: that they still technically own, right, So not a bad idea,
10:25
Speaker 3: but at the same time, we really want to be
10:27
Speaker 3: making sure that if you're looking at a home, and
10:30
Speaker 3: this is what I'm going through at the moment, George,
10:32
Speaker 3: And this isn't the Property Playbook podcast, but you absolutely
10:35
Speaker 3: should go and check that out if you're into property.
10:37
Speaker 3: And I'll be speaking a lot in the next few
10:39
Speaker 3: months about my personal property journey. But when it comes
10:44
Speaker 3: to you know, the reno that I'm about to do,
10:46
Speaker 3: which is very exciting, we've just signed off on it, George.
10:48
Speaker 3: We've tried really hard to make sure we know what
10:52
Speaker 3: to invest, which I at the start was like, well,
10:54
Speaker 3: how do you do that? I don't know? We paid
10:56
Speaker 3: X for it, like renovations could be all the way
10:59
Speaker 3: up to like a million dollars, Like it's we're not
11:02
Speaker 3: spending million dollars. But you know, you look at it
11:05
Speaker 3: and you go, we have a single story property. How
11:08
Speaker 3: much is that going to cost to do new bathrooms
11:10
Speaker 3: and new kitchen, which we actually have to do because
11:13
Speaker 3: they're falling apart. But you go, how much can we afford?
11:16
Speaker 3: And you look at the equity and the property value
11:18
Speaker 3: and how much that is worth. And we've worked out
11:21
Speaker 3: what we're comfortable investing into the renovation so that we
11:25
Speaker 3: don't over capitalize on the property. So over capitalization happens
11:30
Speaker 3: when say you purchased your property, George for the eight
11:33
Speaker 3: hundred thousand dollars we're talking about before, and a bank
11:36
Speaker 3: would go, yes, your your property's worth eight hundred grand,
11:39
Speaker 3: But you go, V, I want to put a pool in,
11:42
Speaker 3: I want to get a brand new spank in kitchen,
11:45
Speaker 3: I want some bathrooms. And you spend two hundred thousand
11:47
Speaker 3: dollars on the property, so technically you paid eight hundred
11:51
Speaker 3: thousand dollars for the property, and now you've technically got
11:54
Speaker 3: a million dollar property, but it's still only worth eight
11:56
Speaker 3: hundred thousand dollars. That's what over capitalization is best, more
12:01
Speaker 3: in the property than what it is worth. Interesting, I'm
12:05
Speaker 3: trying very hard to make sure that doesn't happen. And
12:08
Speaker 3: in the area we've bought, we've got, you know, I'm
12:11
Speaker 3: very grateful for it. But we've got this I think,
12:13
Speaker 3: really cute little house that does need a lot of work.
12:16
Speaker 3: But you know, talking through our options with a builder,
12:19
Speaker 3: we realized very quickly that putting a second story on
12:23
Speaker 3: our house was never going to be an option because
12:25
Speaker 3: it would have made the property and how much we
12:27
Speaker 3: were spending on the property, it would have been so
12:30
Speaker 3: much more money than what the property would be worth
12:32
Speaker 3: even if we did that extension.
12:34
Speaker 2: Does that make sense?
12:35
Speaker 3: So it's interesting to talk these things through because I
12:38
Speaker 3: think a lot of people would just assume, oh, if
12:39
Speaker 3: you whack another story on there, it'd be worth more money. Right, No,
12:44
Speaker 3: that's not how it works. And I was a surprised,
12:46
Speaker 3: as too are Georgia King.
12:48
Speaker 2: Okay, there we go, let's move back to refinancing fee. Yes,
12:53
Speaker 2: at what point in the That's what this episode was about.
12:57
Speaker 2: Apparently we've got a little to the left. At what
13:00
Speaker 2: points should we consider refinancing?
13:02
Speaker 3: Okay, so there are a few times at which you
13:05
Speaker 3: should be talking about this, right, And the first thing
13:08
Speaker 3: you want to do is make sure that your loan
13:11
Speaker 3: isn't tied up for a period of time. And the
13:14
Speaker 3: reason I say that is because mortgage brokers, more often
13:17
Speaker 3: than not get paid via commission, and that is not
13:19
Speaker 3: a bad thing. It just means that the bank is
13:22
Speaker 3: paying them so that you don't have to pay them
13:24
Speaker 3: as much. Usually, a mortgage broker isn't going to charge
13:27
Speaker 3: your feet unless they're like, look, George, we're gonna have
13:29
Speaker 3: to charge for the initial consult because it's our time
13:31
Speaker 3: and you got no problems. But essentially, a mortgage broker
13:34
Speaker 3: gets paid when your loan settles and you get the
13:37
Speaker 3: keys to your shiny new house. But George, that doesn't
13:40
Speaker 3: mean that you're personally paying more. It means that the
13:42
Speaker 3: bank is saying, hey, thanks mortgage broker for bringing this
13:45
Speaker 3: particular client to us without us having to do any work.
13:48
Speaker 3: We'll pay you for that client, which is really nice.
13:51
Speaker 3: But if you refinance within the first twelve months or
13:55
Speaker 3: the first twenty four months, a thing called clawbacks happens.
14:00
Speaker 3: So they will claw back the commission that they paid.
14:04
Speaker 3: So they being the bank that they paid to the
14:06
Speaker 3: mortgage broker and say, the mortgage broker, man, that client
14:09
Speaker 3: that you sent us, that we paid you for didn't
14:11
Speaker 3: even last a year. We would like our money back,
14:14
Speaker 3: And so the money is taken back off the mortgage broker,
14:18
Speaker 3: which you might not care. I don't know. I would care.
14:21
Speaker 3: I wouldn't want a small business impacted by, you know,
14:25
Speaker 3: a decision that I'm making. But in your mortgage broken contracts,
14:28
Speaker 3: it is very likely that you might have to cover
14:31
Speaker 3: that fee.
14:31
Speaker 2: Oh okay, so.
14:33
Speaker 3: Beware, my friends. But if you're not in any clawback period,
14:38
Speaker 3: that is absolutely fine. There might be a change in
14:40
Speaker 3: interest rates you want to take up. I've seen a
14:43
Speaker 3: lot of people come through the Zella doors recently. They're like, oh,
14:46
Speaker 3: Matros rates four and a half percent. I'm like, my friend,
14:48
Speaker 3: what are you doing? Sit down, let's fix that. Or
14:51
Speaker 3: you might have a really big life event that happens
14:54
Speaker 3: in your life and you might go, oh, starting a
14:56
Speaker 3: new job, or someone's got sick, or we're having a baby,
14:59
Speaker 3: and we just want to read look our finances. I
15:01
Speaker 3: think that there are a lot of reasons we refinance.
15:04
Speaker 3: But from my perspective, what you should be doing if
15:08
Speaker 3: you own property and you have a mortgage is building
15:10
Speaker 3: a really good relationship with a mortgage broker. And the
15:13
Speaker 3: reason I say that is one, it's going to make
15:15
Speaker 3: your job really easy because every year or a couple
15:18
Speaker 3: of years, you shoot my text be like, hey Kate,
15:21
Speaker 3: that's why mortgage broke is name. Hey Kate, should we
15:24
Speaker 3: be refine? She'll quickly look up my file and be
15:27
Speaker 3: like the you've got two point five percent interest right? No,
15:30
Speaker 3: like I can't get any better at this point, and
15:32
Speaker 3: I go thank you for your time, and then I'll
15:34
Speaker 3: talk to her later. Or she might look at that
15:37
Speaker 3: and be like, oh, yeah, actually I could probably get
15:39
Speaker 3: you a better deal. I'm going to have a look
15:40
Speaker 3: at it. I'll be like, yes, please. So I think
15:42
Speaker 3: it's really important to have relationships like that because one,
15:46
Speaker 3: it takes a responsibility off you. You're not going and
15:48
Speaker 3: shopping around all of the big banks and working out
15:50
Speaker 3: what's going to be best for you. Your mortgage broker
15:52
Speaker 3: does it. And it's not going to cost you anything.
15:54
Speaker 3: But every time you send that text and it actually
15:57
Speaker 3: ends up being a refinance for what I would believe,
15:59
Speaker 3: good read, your mortgage broker benefits out of it too.
16:02
Speaker 2: Yeah, gotcha. And are there any situations where the mortgage
16:06
Speaker 2: broker would reach out to you and be like, mate,
16:10
Speaker 2: the rates are looking good, would you like to refinance?
16:12
Speaker 2: Or is it more the other way around?
16:14
Speaker 3: Okay, yes, absolutely, This is probably going to be a
16:17
Speaker 3: contentious kind of question that you're asking G And the
16:21
Speaker 3: reason I say that is yes, Zello brokers do so
16:24
Speaker 3: like my financial advisors in my team do because we have,
16:27
Speaker 3: you know, a big list of clients and I am
16:30
Speaker 3: very on top of, you know, talking to my team
16:33
Speaker 3: about making sure that we are al He's making sure
16:36
Speaker 3: every single client is in the best possible position and
16:38
Speaker 3: being really proactive about that. But if there is a
16:41
Speaker 3: mortgage broker who you know, is just looking for new
16:43
Speaker 3: clients and wants to write new loans, it's very unlikely
16:46
Speaker 3: that they might turn around and be like, oh hey, gee,
16:48
Speaker 3: long time no speak, do you want to REFI? Because
16:51
Speaker 3: you might go no, I'm happy thanks to some of
16:54
Speaker 3: them don't do it. It just depends what their priorities
16:58
Speaker 3: are because at the end of the day, like being
17:00
Speaker 3: really brutally honest, a brand new loan is going to
17:03
Speaker 3: be worth more money to a mortgage broker than a refinance.
17:07
Speaker 3: But from my perspective, it's about looking after the friends
17:10
Speaker 3: and family you already have.
17:12
Speaker 2: Yeah, okay, gotcha cool.
17:14
Speaker 3: That felt like a sales pitch, Fizella. It didn't mean
17:16
Speaker 3: it to be.
17:17
Speaker 2: Never mind me. You just see people doing good things,
17:21
Speaker 2: as you would.
17:21
Speaker 3: Say, try try.
17:23
Speaker 2: So how often do people typically refinance over the life
17:27
Speaker 2: of their loan?
17:27
Speaker 3: Be as many times as you want. It's not a
17:29
Speaker 3: bad idea to every couple of years have a look
17:32
Speaker 3: at your mortgage and see what's working for you. But
17:34
Speaker 3: in terms of how often people do it, it really
17:37
Speaker 3: depends on the individual. So it really really is important
17:41
Speaker 3: to make sure that you understand your mortgage as well.
17:45
Speaker 3: So for me, using me as an example, I'm self employed.
17:50
Speaker 3: Like you guys know, I run cheese on the money
17:52
Speaker 3: and my income is very different to a salary and
17:55
Speaker 3: wager employee. So I don't want to refinance all that
17:59
Speaker 3: often because if I do, it's such an admin nightmare. George,
18:03
Speaker 3: I have to like go through all my business and
18:05
Speaker 3: my business profit if it is even making profit, and
18:08
Speaker 3: have all of that questioned and reviewed. Whereas my partner
18:12
Speaker 3: who has a salary and way journing job, he just
18:14
Speaker 3: has to provide like three months worth of bank statements
18:17
Speaker 3: and pay slips and make sure that they're all good
18:19
Speaker 3: to go. So it can be a different experience for
18:22
Speaker 3: everybody involved. But typically every couple of years, I would
18:25
Speaker 3: absolutely recommend looking at it. But that's another warning or
18:30
Speaker 3: little red flag. If you're going to refinance every few years, George,
18:34
Speaker 3: you need to make sure that the term is the same.
18:38
Speaker 3: So what I mean by that is, let's say tomorrow, George,
18:43
Speaker 3: you get a mortgage for eight hundred thousand dollars and
18:46
Speaker 3: you go, yay, I have my first thirty year mortgage.
18:50
Speaker 3: And in two years time, you go, I should refinance
18:54
Speaker 3: a two years ago to the day, listen to a
18:57
Speaker 3: She's on the Money podcast and they said, I should
18:59
Speaker 3: review this. Going to do just that. So you go
19:02
Speaker 3: ahead and you go, hey, mortgage broker, can you get
19:04
Speaker 3: me a new deal? And they go, yep, interest rates
19:07
Speaker 3: doing really well, Gee, I can get you a better deal,
19:09
Speaker 3: no problems. What I want you to be aware of
19:12
Speaker 3: is not signing another thirty year mortgage because you've just
19:15
Speaker 3: served two years in a mortgage. George, right, So you
19:19
Speaker 3: want to be asking your mortgage broker to make sure
19:21
Speaker 3: that your mortgage term is only twenty eight years, because
19:25
Speaker 3: otherwise you'll be resetting that mortgage term to another thirty years,
19:30
Speaker 3: thus pushing out your mortgage for another two years. So
19:33
Speaker 3: even though you might be paying less interest, or you
19:37
Speaker 3: might have less monthly repayments to make, and you go, wow,
19:40
Speaker 3: this is really nice, you might be shooting yourself in
19:42
Speaker 3: the foot by resetting that mortgage term to thirty years
19:45
Speaker 3: when in reality you want your home paid off in
19:48
Speaker 3: twenty eight because you're already served two Does that make sense?
19:50
Speaker 2: It makes sense. Is that something that the mortgage broker
19:53
Speaker 2: would flag with you or is that kind of your
19:55
Speaker 2: responsibility to make sure that that's what happens.
19:57
Speaker 3: I would say it's both okay, But given I don't
20:00
Speaker 3: know the mortgage broker you guys can talk to, I
20:02
Speaker 3: would say, definitely flag it, just to be sure, and
20:05
Speaker 3: any good mortgage broker would be like g of course,
20:09
Speaker 3: And if your mortgage broker didn't pick that up, at
20:11
Speaker 3: least you.
20:12
Speaker 2: Did, okay, And presumably there's no limit on the number
20:15
Speaker 2: of times that you can refinance.
20:16
Speaker 3: No, absolutely not. The only thing I would say is
20:19
Speaker 3: really important is the refinancing costs. So you know, I
20:22
Speaker 3: was talking before about clawbacks and understanding whether there's going
20:26
Speaker 3: to be any money that's taken back off the mortgage
20:29
Speaker 3: broker or if you've got like an advance. So you
20:32
Speaker 3: know how some mortgages recently are like you'll get four
20:34
Speaker 3: thousand dollars in XYZ if you sign up to our
20:37
Speaker 3: mortgage that will and a guarantee it have some kind
20:40
Speaker 3: of clawback in it that if you refinance before twelve
20:43
Speaker 3: months or before twenty four months or something, you have
20:46
Speaker 3: to pay that back. And that's okay. You just need
20:49
Speaker 3: to be aware of that, but no, there's no limit
20:52
Speaker 3: on it. You do need to make sure that you're
20:53
Speaker 3: still going to meet the credit requirements of the lender
20:55
Speaker 3: that you're going to work with, so making sure that's
20:57
Speaker 3: all good and your credit history is good is important.
21:00
Speaker 3: But no, there is no limit on that. And that's
21:02
Speaker 3: why I always say, just be on top of it,
21:04
Speaker 3: Like if there's a better interest rate, i'd be asking
21:06
Speaker 3: for it. And you know, again, off topic, but I
21:10
Speaker 3: feel like I do this a lot before you consider
21:12
Speaker 3: refinancing completely, because it is a lot of admin for
21:15
Speaker 3: everybody involved. Have a look at what's out there, and
21:18
Speaker 3: if you see an interest rate that you're like, Wow,
21:20
Speaker 3: I'm not paying that, I wish I was Cally Bank.
21:23
Speaker 3: You're excuse me, Ah, new bank over there is doing
21:26
Speaker 3: a very nice interest rate. Could you match it? And
21:28
Speaker 3: they might say yes, no problems, George, are I will
21:31
Speaker 3: match it because I don't want you to as a
21:33
Speaker 3: client leave me. Or they might go oh gee, we
21:36
Speaker 3: can't match that, and then you'll scurry after your bank
21:38
Speaker 3: and be like, hello, kin, Sarah, it is worth me
21:40
Speaker 3: going through this admin nightmare to apply for a mortgage
21:43
Speaker 3: because my current bank will not give me what you have.
21:46
Speaker 2: Okay, that makes sense. It makes sense, It makes a story.
21:49
Speaker 3: Adds up all checks out.
21:51
Speaker 2: You touched on credit for a second there, v which
21:54
Speaker 2: leads me to credits scores. How important are they when
21:56
Speaker 2: it comes to refinancing.
21:58
Speaker 3: Very George, because your credit's score is going to be
22:01
Speaker 3: an indicator of what type of credit you have access to.
22:05
Speaker 3: So if you want the lowest of low interest rates
22:08
Speaker 3: and the best possible deal, they are only made by
22:11
Speaker 3: people who offer credit to people who have really ridiculously
22:15
Speaker 3: good credit scores. So it's important to understand that the
22:18
Speaker 3: stronger your credit score, the more reliable you essentially are
22:21
Speaker 3: to lend to, so banks will look pretty favorably onto
22:23
Speaker 3: you as a borrower. And then conversely, if you've incurred
22:27
Speaker 3: maybe some bad debt after getting your mortgage, like you
22:30
Speaker 3: got your mortgage off a few years ago, and then
22:32
Speaker 3: you've gotten some personal loans and maybe you've defaulted on
22:34
Speaker 3: one of the payments, you might not actually be able
22:37
Speaker 3: to refinance. So it's important to realize it. Just because
22:40
Speaker 3: you've got the mortgage in the first place doesn't mean
22:42
Speaker 3: another lender is going to scoop you up and say, yep,
22:45
Speaker 3: no problems. We'd love for you to be our client.
22:47
Speaker 2: Okay, you can't see that. I feel like credit scores
22:50
Speaker 2: are much more important than we give them credit for.
22:54
Speaker 3: Oh she's funny, she's a funny goal. Thank you, she's
22:58
Speaker 3: on the comedy.
23:00
Speaker 2: I have three quick questions for you before we head
23:02
Speaker 2: to the break. I am away got some brains.
23:05
Speaker 3: That's your job.
23:06
Speaker 2: That is true? If we're switching from a variable loan
23:09
Speaker 2: V to a fixed rate loan, is it true that
23:12
Speaker 2: there's a limit on the extra repayments that we can
23:15
Speaker 2: be making. Because I read that this was the thing,
23:17
Speaker 2: But is it true?
23:18
Speaker 3: Love this?
23:19
Speaker 2: Yes and no?
23:20
Speaker 3: So yes and also no, it depends on your lender
23:23
Speaker 3: and what the rules they've put in place are. Yes,
23:26
Speaker 3: So what you've read is arguably going to be very true.
23:31
Speaker 3: So ge, when you have a variable rate loan, you
23:33
Speaker 3: can make as many additional repayments as you want to
23:35
Speaker 3: depending on the loan, without being penalized for it. And
23:39
Speaker 3: that's because you're seeing the ups and down of the
23:42
Speaker 3: market in the same way that you would in the
23:43
Speaker 3: share market in a way. So it might be two
23:46
Speaker 3: point five percent, but then your variable interest rate might
23:48
Speaker 3: go up and they go, oh cool, like you're interest
23:50
Speaker 3: rate on your mortgage now three percent. But a lot
23:53
Speaker 3: of people who are in a position where they're like, no, v,
23:55
Speaker 3: I really want to fixed rate loan. The reason you
23:58
Speaker 3: would do that is to lock in consistent payments. So
24:03
Speaker 3: instead of going, oh, well, gee, I know the interest
24:05
Speaker 3: rate could go down, but like, even if it goes down,
24:07
Speaker 3: it's not worth the benefit of it going up and
24:10
Speaker 3: me not being able to pay the mortgage. So if
24:12
Speaker 3: you have a fixed rate loan, it is very likely
24:15
Speaker 3: that you might only be able to pay up to
24:17
Speaker 3: a certain amount in mortgage orpayments, and that could be
24:19
Speaker 3: like ten thousand dollars a year, it could be thirty
24:21
Speaker 3: thousand dollars a year, or thirty thousand dollars over a
24:24
Speaker 3: certain period of time that they've stipulated, and if you
24:27
Speaker 3: do actually pay it off more than what they have outlined,
24:31
Speaker 3: you might end up with a penalty fee, which feels
24:33
Speaker 3: like they're shooting you in the foot, but is something
24:36
Speaker 3: to be really aware of because a lot of these
24:40
Speaker 3: really no frills kind of mortgage companies, they'll be like,
24:44
Speaker 3: oh my gosh, our interest rate's the lowest on the market,
24:47
Speaker 3: and you go, oh my gosh, gee, that's so good.
24:49
Speaker 3: I'm gonna skip the broker. I'm going to skip straight
24:52
Speaker 3: down the street and I am going to get a
24:54
Speaker 3: loan from them. But you might very quickly find out
24:57
Speaker 3: that that no frills loan means you don't get an
25:00
Speaker 3: offset account, which I'm sure we'll talk about at some point,
25:02
Speaker 3: and you actually don't have the ability to make additional repayments.
25:06
Speaker 3: So even the interest rate is really low, it's not
25:08
Speaker 3: of benefit because you're stuck in the loan for definitely
25:11
Speaker 3: the thirty year period and you don't have the ability
25:14
Speaker 3: to pay it out early. So does that make sense?
25:16
Speaker 3: I hope it makes sense. It making sense today you are.
25:19
Speaker 2: You're speaking clearly and concisely. Well done, you, thank you,
25:24
Speaker 2: thank you.
25:24
Speaker 3: I'm here all day.
25:25
Speaker 2: So now I'm assuming would be a good time to
25:28
Speaker 2: be refinancing because the interest rates are low.
25:30
Speaker 3: If you haven't done it in a couple of years,
25:32
Speaker 3: it is always worth revisiting. And I guess I'm biased
25:35
Speaker 3: because I do believe deeply in mortgage brokers that are
25:39
Speaker 3: not bank aligned. So that sounds bad because I have
25:42
Speaker 3: a lot of friends who work as mortgage brokers at
25:44
Speaker 3: particular financial institutions, like they might be like common Wealth
25:48
Speaker 3: or NAB, or they might be a west Pack or
25:50
Speaker 3: you know, any of the Big four. But the reason
25:53
Speaker 3: I would say go to an independent mortgage broke is
25:55
Speaker 3: because they can look at every single mortgage product on
25:58
Speaker 3: the market and also like the credit you unions and
26:00
Speaker 3: stuff and get you the best possible deal for your
26:02
Speaker 3: situation instead of just skipping down to Commonwealth, which Commonwealth
26:06
Speaker 3: mortgages might suit you perfectly. G but if you walk
26:10
Speaker 3: in their doors. All they're going to be able to
26:12
Speaker 3: offer you is the Commonwealth mortgage, like they're not able
26:15
Speaker 3: to actually go Hey, g so the Bendigo bank one
26:17
Speaker 3: is actually better for you in this particular situation. Or
26:21
Speaker 3: you know, you might want an offset account or a
26:23
Speaker 3: redraw facility or something that helps you financially and Commonwealth
26:28
Speaker 3: will be like, yeah, nah, we just don't do that.
26:30
Speaker 3: This is our mortgage. We've got two options. So I
26:33
Speaker 3: just see such value in people going to mortgage brokers
26:37
Speaker 3: because it doesn't cost you anymore but will save you
26:40
Speaker 3: a lot over the long period.
26:42
Speaker 2: Yeah.
26:42
Speaker 3: I don't know very heated about that.
26:44
Speaker 2: No, well, it just it just makes sense, guys.
26:46
Speaker 3: It just makes sense.
26:47
Speaker 2: Makes the sense. So vhe when can we expect those
26:50
Speaker 2: interest rates to go up? I know you can't see
26:53
Speaker 2: into the future, but do you have any indication of
26:56
Speaker 2: when things will be spicing back up a little bit? Oh?
26:59
Speaker 3: When did the restates become spassy? I think it's going
27:02
Speaker 3: to be a little while. And the reason that I
27:05
Speaker 3: say that is, I mean the economists at the moment
27:08
Speaker 3: are predicting that interest rates are going to surge soon,
27:11
Speaker 3: but the Reserve Bank of Australia has actually forecast that
27:15
Speaker 3: it might be some way off, and I would trust
27:18
Speaker 3: them over the economists in this particular circumstance, just because
27:22
Speaker 3: of what we've gone through with COVID. And I say
27:25
Speaker 3: that because can you imagine if we as Australia as
27:28
Speaker 3: a country, as a community have gone through what we've
27:30
Speaker 3: gone through over the last two years, and then all
27:32
Speaker 3: the banks like by the way your mortgage repayments are
27:35
Speaker 3: more like, that is not going to be good for
27:37
Speaker 3: property prices. It is not going to be good for
27:40
Speaker 3: the economy in general. Everybody is going to stop spending
27:42
Speaker 3: because they're spending more on their mortgages and be a
27:45
Speaker 3: little bit more frugal, and it's not actually going to
27:47
Speaker 3: help economic growth in any way, shape or form. So
27:50
Speaker 3: from my perspective, I don't think that they will go
27:53
Speaker 3: up significantly. I mean I think that they might go
27:56
Speaker 3: up in terms of you know how at the moment
27:58
Speaker 3: you can get like two point five five percent fixed
28:00
Speaker 3: rate mortgages, I think that that might go up. But
28:03
Speaker 3: if you already have one, you're not going to be
28:05
Speaker 3: stung with like a three percent sharp increase because of inflation.
28:09
Speaker 3: Does that make sense? So? I think that we're relatively okay,
28:13
Speaker 3: So when it comes to rising interest rates, I think
28:15
Speaker 3: it's important to keep an eye on what's going on,
28:18
Speaker 3: because I mean, at the moment, I think you can
28:19
Speaker 3: go and get a variable rate of one point nine
28:22
Speaker 3: nine percent perannum at like eighty six four hundred and
28:24
Speaker 3: our friends at you bank, and it's one of those
28:27
Speaker 3: things that I don't think that your personal variable interest
28:31
Speaker 3: rate on a mortgage is going to change, but I
28:33
Speaker 3: do think that that might increase over time over the
28:36
Speaker 3: next six months. I think that we won't see one
28:38
Speaker 3: point nine to nine percent because we can't afford it
28:40
Speaker 3: or banks can't afford it. But I don't think we'll
28:43
Speaker 3: be shooting ourselves in the foot by increasing actual consumers loans.
28:46
Speaker 3: But that's personal opinion. And at the end of the day,
28:49
Speaker 3: when you went and got a mortgage, you would have
28:52
Speaker 3: been assessed at a higher interest rate to make sure
28:54
Speaker 3: that you could service that. So I don't think too
28:57
Speaker 3: many people will be in a worse off position. But
29:00
Speaker 3: when it comes to the RBA and the government, I
29:02
Speaker 3: genuinely believe they're going to make sure that everybody's relatively okay.
29:06
Speaker 3: We've had a pretty Rocky Ride.
29:08
Speaker 2: All right, cool, Well, I think we'll leave it there
29:10
Speaker 2: for now, V, but we will be back after a
29:12
Speaker 2: very short break to discuss how to actually refinance mortgage,
29:16
Speaker 2: like the nuts and belts, how do we actually do it?
29:18
Speaker 2: And we will also be flagging the common mistakes vickidc's
29:22
Speaker 2: when it comes to refinancing, So please don't go anywhere,
29:26
Speaker 2: alrighty V. Straight back into it, my girl, How do
29:30
Speaker 2: we actually refinance our mortgaging?
29:33
Speaker 3: Well, I mean, like pragmatically speaking, to refinance mortgage, you're
29:37
Speaker 3: going to need to firstly have a mortgage to start with,
29:41
Speaker 3: so that's usually a great place to start. Check your
29:43
Speaker 3: bank accounts, check your financial sitch.
29:45
Speaker 2: If you've got a.
29:46
Speaker 3: Mortgage, you, my friend, could be up for the exciting
29:50
Speaker 3: process of refinancing. After that, I would actually sit back
29:54
Speaker 3: and go, what are your goals? Why are you refinancing?
29:56
Speaker 3: You doing it because you just heard this podcast episode
29:59
Speaker 3: and you're like, what a good idea? Or are we
30:01
Speaker 3: actually refinancing with the intention to save money? Is it
30:05
Speaker 3: to funder renovation or is it to purchase an investment
30:08
Speaker 3: property or a new home? Like, what's the plan? It's
30:11
Speaker 3: super helpful to have a reason here because often if
30:13
Speaker 3: you're going to sit down with a broker or you're
30:15
Speaker 3: going to do it, like what are you even looking for?
30:18
Speaker 3: Because you might go, all right, well, their interest rates better,
30:21
Speaker 3: but you might also have a whole heap of savings
30:23
Speaker 3: that you want in an offset, but that new interest
30:26
Speaker 3: rate with a different bank might not actually offer an
30:28
Speaker 3: offset facility. So I do recommend and I know that
30:31
Speaker 3: not everybody is going to agree with me here, but
30:34
Speaker 3: I do recommend fully wholeheartedly going and talking to a
30:37
Speaker 3: broker because they are going to be able to make
30:40
Speaker 3: sure that everything you want to achieve happens if it
30:43
Speaker 3: is actually possible, and you still get all the benefits
30:46
Speaker 3: from your original mortgage, Like you might not even know
30:49
Speaker 3: that you have some kind of benefit with a mortgage
30:51
Speaker 3: and you might lose it, if that makes sense. So
30:53
Speaker 3: I think it's really important to just know your stuff,
30:56
Speaker 3: but also more importantly, no your goal, Like why are
30:58
Speaker 3: we doing this? Is this just because you listen to
31:00
Speaker 3: the episode OOOFED?
31:01
Speaker 2: If it's true?
31:02
Speaker 3: George, look at us, we are little influencess. I believe
31:05
Speaker 3: they call them influencers now because we're financial influences. Well,
31:09
Speaker 3: I mean you are whole babe, you here too, You
31:12
Speaker 3: here every week Like if you think you are immune
31:15
Speaker 3: to this, you are wrong. It's you as well.
31:19
Speaker 2: Well that was the weirdest laugh ever. Sorry, continue, No,
31:22
Speaker 2: we love that.
31:22
Speaker 3: Keep that party Insand the next bit is do research.
31:26
Speaker 3: So make sure that you are scouting around for the
31:29
Speaker 3: best deals and the best options and the best rates
31:32
Speaker 3: and the best value around. So obviously I'd recommend chatting
31:36
Speaker 3: with a mortgage broke up, but you can also use
31:38
Speaker 3: comparison websites. But do keep in mind that comparison websites
31:42
Speaker 3: often earn commission from ranking certain lenders higher than others.
31:46
Speaker 3: I have you know a little bit of insider information
31:49
Speaker 3: that that happens quite often, and that different lenders pay
31:53
Speaker 3: to come up at different rankings on those comparison websites.
31:56
Speaker 3: So please don't take them as gospel. Make sure that
31:59
Speaker 3: you are making the right decision for you, not the
32:02
Speaker 3: right decision because there was a sponsored ad at the
32:04
Speaker 3: top of the page. And remember that mortgage brokers won't
32:08
Speaker 3: charge you as they make money from the lender that
32:10
Speaker 3: you are referred to, not a more expensive rate for you.
32:14
Speaker 3: I think people just assume that the cost is absorbed
32:17
Speaker 3: into the mortgage. It's not. It's not how it works.
32:20
Speaker 3: If you see a rate on the website and you
32:23
Speaker 3: go direct, it will be exactly the same as what
32:25
Speaker 3: the rate you get with your mortgage broker is, I promise.
32:28
Speaker 2: Okay, So the mortgage brokers are essentially free. We love
32:33
Speaker 2: that we are encouraging people to have conversations and engage
32:36
Speaker 2: with the brokers. But there are still some fees associated
32:41
Speaker 2: when it comes to refinancing, right.
32:43
Speaker 3: Yes, yes they are, and quickly before I tell you
32:45
Speaker 3: what those are, I think it's really important for me
32:48
Speaker 3: to I guess outline that some mortgage brokers actually will
32:52
Speaker 3: charge you a fee. And the reason they're charging your
32:55
Speaker 3: fee is because after the Royal Commission, compliance increased significantly.
33:01
Speaker 3: Like I mean, we are doing triple the amount of
33:04
Speaker 3: work that we were before for work that might not
33:07
Speaker 3: go through because lending has gotten even harder after the
33:11
Speaker 3: Royal Commission. So it is not uncommon practice nowadays for
33:15
Speaker 3: you to go to a mortgage broker and say, hey,
33:17
Speaker 3: mortgage broker, it's my first loan. I'd like to get
33:20
Speaker 3: pre approval, and they go, yeah, no problems. Pre approvals
33:23
Speaker 3: four hundred and fifty dollars and you might scoff at
33:26
Speaker 3: that and be like, what the hell, Like I thought
33:28
Speaker 3: this was going to be free. But what you have
33:31
Speaker 3: to understand in this day and age, especially in twenty
33:33
Speaker 3: twenty two, is that so many people get mortgage pre
33:37
Speaker 3: approval and then let it laps because mortgage pre approval
33:40
Speaker 3: usually only lasts for ninety days, so for three months,
33:44
Speaker 3: and you might not find a home in that period
33:47
Speaker 3: of time. So this mortgage broker has done a whole
33:49
Speaker 3: heap of work for you and has had no payment
33:52
Speaker 3: because they only get paid once that loan settles, so
33:55
Speaker 3: they've done that, and then after that ninety days they
33:58
Speaker 3: might have to go back through the same proces again,
34:00
Speaker 3: which is fine. Most mortgage brokers are absolutely okay, but George,
34:05
Speaker 3: as you know, property market's pretty hot. It might take
34:07
Speaker 3: you twelve months to buy, so they're doing all these
34:10
Speaker 3: pre approvals and all this work that they aren't getting
34:13
Speaker 3: paid for. So it's very common nowadays for a mortgage
34:16
Speaker 3: broker to go, hey, gee, get it, but pre approval
34:21
Speaker 3: is actually four hundred and fifty dollars, And you might go, ah,
34:23
Speaker 3: I was just getting pre approval because I wanted to
34:25
Speaker 3: see what I could buy wasn't too serious, so it
34:28
Speaker 3: kind of scares away the people that aren't super serious.
34:31
Speaker 3: But then if you do pre approval with a particular broker,
34:34
Speaker 3: they're just going to renew that for you whenever you
34:36
Speaker 3: need it. So you're not going to pay that four
34:38
Speaker 3: hundred and fifty dollars every three months, if that makes sense,
34:40
Speaker 3: because you know you've shown that you're serious about it.
34:43
Speaker 3: So I don't think that in the grand scheme of
34:45
Speaker 3: property and how much property is going to cost you,
34:47
Speaker 3: that's a fee that we should be worried about. But
34:50
Speaker 3: I just want to put it on the table because
34:52
Speaker 3: I know I've had a few messages recently from people going,
34:54
Speaker 3: oh my god, they tried to charge me and they
34:56
Speaker 3: were then to be free. It's like, oh no, I
34:58
Speaker 3: totally get why they might. And you know what, if
35:01
Speaker 3: your broker is charging you, it's very likely that they
35:04
Speaker 3: are a good broker and they're just making sure that
35:06
Speaker 3: they're only working with good clients.
35:07
Speaker 2: Stunning.
35:08
Speaker 3: Thank you for coming to my broking, Ted Torr loved it.
35:11
Speaker 3: I will get back on to the question you asked me,
35:14
Speaker 3: which was what are the fees associated with refinancing? So
35:18
Speaker 3: first things First, if you have a fixed rate mortgage,
35:20
Speaker 3: there could be a fee for you getting out of
35:22
Speaker 3: a fixed rate mortgage.
35:23
Speaker 2: It's twofold.
35:25
Speaker 3: You could be shooting yourself in the foot and you go, oh, well,
35:27
Speaker 3: I know, I get a lot of interest rate, but
35:29
Speaker 3: that's a really big sum of money. Or you could go,
35:32
Speaker 3: that might be a big sum of money, but you
35:34
Speaker 3: know what, I'm going to say more by changing my mortgage.
35:36
Speaker 3: So do the maths work out what is going to
35:38
Speaker 3: work best for you. Number two is there could also
35:41
Speaker 3: be an application fee for your new loan, so be
35:44
Speaker 3: aware of that and do a little bit of googling
35:46
Speaker 3: around what that could mean, or just ask your broker.
35:49
Speaker 3: And you might have to pay a switching fee if
35:52
Speaker 3: you're switching loans but staying with your current lender, because
35:55
Speaker 3: if banks don't make money, what do they do?
35:57
Speaker 1: George.
35:59
Speaker 3: And the fourth and most frustrating one is a termination
36:02
Speaker 3: fee and that could pop up at some point if
36:05
Speaker 3: you're terminating a mortgage before the end of your term.
36:08
Speaker 3: So just be really careful with these costs because you
36:11
Speaker 3: don't want to refinance to a new bank and go
36:13
Speaker 3: through that entire process without having evaluated the loan. You
36:16
Speaker 3: have because I guarantee George that new bank is not
36:20
Speaker 3: going to be like, oh my gosh, have you considered
36:22
Speaker 3: the termination fee on your other mortgage? They're just gonna
36:25
Speaker 3: go heck, yes, George's moving banks. We're going to take her.
36:29
Speaker 3: So you might have already signed off on a new
36:30
Speaker 3: refinance and then get stung later after you've transferred the mortgage.
36:34
Speaker 3: So just make sure you know what you're talking about
36:37
Speaker 3: and you are doing your due diligence.
36:39
Speaker 2: Okay, Well, speaking of due diligence, did I say that properly?
36:43
Speaker 3: Yeah? Sounded about right?
36:45
Speaker 2: Uh huh. What are the common mistakes that people are
36:48
Speaker 2: making in the refinancing space fee?
36:51
Speaker 3: There are a few, and you would be very excited
36:54
Speaker 3: to know. I have pre listed a few of them.
36:56
Speaker 3: Are you ready? Are you sitting down me? Are you excited? M? Yeah?
37:01
Speaker 1: Girl?
37:01
Speaker 3: Oh yeah, bring it alright. So, g The first one
37:04
Speaker 3: out the gate is people underestimate, and this is super
37:08
Speaker 3: common how much you can actually save by refinancing, because
37:11
Speaker 3: you might go, ah, I don't need to refinance my
37:14
Speaker 3: mortgage is like three percent, it's only two point five,
37:17
Speaker 3: Like why bother? But you absolutely should be bothered because
37:22
Speaker 3: we haven't said this quote on the podcast in a
37:24
Speaker 3: really long time. But g from little things, big things grow.
37:28
Speaker 3: And if you were thinking of refinancing your mortgage but
37:31
Speaker 3: decided against it because the best rate you can find
37:33
Speaker 3: is only like zero point five percent lower than your
37:36
Speaker 3: current rate, I absolutely wouldn't be dismissing it because if
37:40
Speaker 3: you start breaking it down, and we use an example
37:42
Speaker 3: of you know how earlier in the episode we said
37:44
Speaker 3: that you had five hundred thousand dollars equity. Let's use
37:46
Speaker 3: a five hundred thousand dollar example. So let's say half
37:50
Speaker 3: a percent on five hundred thousand dollars. You go, that's
37:53
Speaker 3: not much, right, but it is because a five hundred
37:56
Speaker 3: thousand dollar alone means that if you refinanced, you'd be
37:59
Speaker 3: paying two twenty one hundred and eighty one dollars each
38:02
Speaker 3: and every single month instead of twenty three hundred dollars.
38:06
Speaker 3: And that doesn't sound massive, but over a period of
38:10
Speaker 3: like five years, that's seven five hundred and sixty bucks.
38:14
Speaker 3: And if you have that loan for twenty five years,
38:16
Speaker 3: which most of you might because that's a standard term
38:20
Speaker 3: for mortgages, that's thirty seven eight hundred grand, Like what,
38:24
Speaker 3: that's not even including like compound interest if you decided
38:27
Speaker 3: to invest it instead of paying it off your mortgage.
38:30
Speaker 2: That's insane. Is that correct?
38:32
Speaker 3: That is absolutely correct, And that's way more than one
38:36
Speaker 3: year worth of mortgage or payments. So zero point five
38:39
Speaker 3: percent could actually mean wiping like three or four years
38:43
Speaker 3: off your mortgage to begin with. So like, let's just
38:47
Speaker 3: calculate that and work out what that actually means for us,
38:50
Speaker 3: because too many times people are like, it's not worth it.
38:53
Speaker 3: It's half a percent. I just did the maths. Wasn't quick,
38:57
Speaker 3: but it was correct. Lastly, all right, you're welcome. You're welcome.
39:02
Speaker 3: The next thing, I don't think anything can be as
39:04
Speaker 3: sexy as the maths we just did together, George. But
39:07
Speaker 3: the next thing that I feel like is a relatively
39:09
Speaker 3: common mistake is forgetting to factor in the cost of
39:11
Speaker 3: changing lenders. Like, as we said earlier in this episode,
39:14
Speaker 3: while most mortgage brogers don't charge fees for this, there
39:17
Speaker 3: are still multiple fees that are attached to mortgage refinancing
39:21
Speaker 3: that you need to be aware of. And if you're
39:22
Speaker 3: breaking a loan and you're still within the period that
39:25
Speaker 3: you had signed up for, it could cost you thousands
39:27
Speaker 3: of dollars. So let's just be really careful. I'm hoping
39:31
Speaker 3: that this podcast pumps you up and gets you super motivated,
39:34
Speaker 3: but not so motivated that we gloss over all the
39:36
Speaker 3: important stuff. So to counter this and make sure that
39:39
Speaker 3: your decision is the right one to make when it
39:41
Speaker 3: comes to refinancing, have a chat with a broker. I
39:45
Speaker 3: can't say that enough. The next common mistake that I've
39:48
Speaker 3: got listed down here, George is a believing that you
39:51
Speaker 3: probably can't refinance a fixed loan. So that is absolutely
39:55
Speaker 3: not true. Although it can be a little bit more
39:57
Speaker 3: complex and a little bit harder to get out of,
39:59
Speaker 3: and maybe there are a few fees attached to it.
40:01
Speaker 3: A broker will know what is going on here, but
40:04
Speaker 3: it actually could be worth you potentially paying those break
40:07
Speaker 3: fees to get a really good interest rate. Like we
40:10
Speaker 3: were talking about the eighty six four hundred bank earlier,
40:12
Speaker 3: and they're one point nine to nine interest rate, Like
40:15
Speaker 3: that's pretty good. Imagine if you were like on a
40:18
Speaker 3: standard four percent, which three or four years ago was standard,
40:22
Speaker 3: and you're literally going to cut your interest repayments in half,
40:26
Speaker 3: maybe that is worth one thousand dollars in a break fee.
40:28
Speaker 3: Maybe that is worth two thousand dollars in a break fee.
40:31
Speaker 3: You might scoff at that and be like, Victoria on
40:33
Speaker 3: thousand dollars is so much money? And I'll be like, yes,
40:36
Speaker 3: But did you not hear the example before I gave
40:38
Speaker 3: Georgia where you're going to save thirty seven eight hundred
40:41
Speaker 3: dollars over the lifetime of your loan. Are you going
40:44
Speaker 3: to pay one thousand dollars now to save that in
40:46
Speaker 3: the future?
40:46
Speaker 2: Maybe yeah, I don't know.
40:48
Speaker 3: I just feel like that's really important to consider. And
40:51
Speaker 3: the fourth thing g which I feel like I've been
40:54
Speaker 3: harping on about recently. When am I not harping on
40:57
Speaker 3: about something related to finance, but I did. But the
41:00
Speaker 3: other week when we were doing book club and we
41:02
Speaker 3: did the first book, The Richest Man in Babylon, and
41:05
Speaker 3: I was talking about trusting professionals. So I feel like
41:08
Speaker 3: one of the most common mistakes is trusting the wrong
41:11
Speaker 3: people and not trusting the professionals and thinking we can
41:14
Speaker 3: do it ourselves. Or your dad once refinanced his mortgage,
41:17
Speaker 3: so he knows it. And as much as we all
41:19
Speaker 3: love our dads and you know, we are grateful to
41:21
Speaker 3: have help from family and friends and people that want
41:24
Speaker 3: to help. At the end of the day, if they
41:25
Speaker 3: aren't finance professionals, I would really avoid taking advice from
41:30
Speaker 3: them because George, as I said on that episode, you
41:34
Speaker 3: wouldn't buy diamonds off a bricklayer. So I just think
41:37
Speaker 3: that it is really important to trust the professionals when
41:39
Speaker 3: it comes to refinancing, because even though your uncle George's
41:42
Speaker 3: best mate Bill can actually refinance your loan and he
41:45
Speaker 3: might have a really solid thing to say, is it
41:47
Speaker 3: actually the best thing for you? And given most mortgage
41:50
Speaker 3: brokers are free, why aren't we just going to the
41:52
Speaker 3: pros G.
41:53
Speaker 2: Yeah, definitely. I feel like just because people speak with authority,
41:57
Speaker 2: it doesn't mean they are the authority. Art.
41:59
Speaker 3: Gee, I actually have one more? Can I add one
42:01
Speaker 3: more thing? I said I was done, but I wasn't done.
42:03
Speaker 3: I'm not done. Are you ready sit down?
42:05
Speaker 2: Please?
42:06
Speaker 3: The most important thing is not the interest rate, like
42:09
Speaker 3: people seem to think. And I mean, I've just typed
42:11
Speaker 3: on about it, so I will absolutely forgive you guys
42:13
Speaker 3: if you were like, but I thought the interest rate
42:15
Speaker 3: was really important. It is, but it isn't the be
42:18
Speaker 3: all end all, Like, don't forget about a whole heap
42:20
Speaker 3: of other perks, like potentially having an offset account or
42:23
Speaker 3: the ability to split a loan or have a redraw facility,
42:25
Speaker 3: if that's in line with your values. Because I'm telling
42:28
Speaker 3: you right now, my mortgage is not the lowest interest
42:32
Speaker 3: rate on the market, and the reason for that is
42:34
Speaker 3: because I wanted to have an offset account facility and
42:37
Speaker 3: that wasn't available on the lowest rate loan on the
42:40
Speaker 3: market at that time when I did this, what like
42:43
Speaker 3: maybe fifteen or sixteen months ago. But I think it's
42:47
Speaker 3: really important to not focus solely on the interest rate
42:50
Speaker 3: because you might be getting a super good rate, maybe
42:52
Speaker 3: you need a really basic loan, but more often than not,
42:55
Speaker 3: those super basic loans don't have all the bells and
42:58
Speaker 3: whistles that you might want in a mortgage facility. So
43:02
Speaker 3: I think that's really important to take into consideration too,
43:05
Speaker 3: g V.
43:06
Speaker 2: Just before we head off, obviously, the last two years
43:09
Speaker 2: for pretty much everyone everywhere have been dumpster fire. You're
43:14
Speaker 2: gonna call it garbage fire. So for anyone listening right
43:19
Speaker 2: now who is struggling to meet their mortgage repayments, do
43:23
Speaker 2: you have any words of wisdom or advice as to
43:26
Speaker 2: what they can be doing to make life a little easier,
43:29
Speaker 2: of course, I do.
43:30
Speaker 3: G I think the first is realizing that you're not alone.
43:33
Speaker 3: So many people around the country are going through this
43:36
Speaker 3: at the moment, and the best thing you can do
43:39
Speaker 3: is reach out for help. If this is something that
43:41
Speaker 3: is putting unnecessary pressure on you, please please please pick
43:45
Speaker 3: up the phone and call your bank, like, call whoever
43:50
Speaker 3: you've got your mortgage with, regardless of who they are,
43:52
Speaker 3: and just be like, I'm experiencing financial hardship. I really
43:55
Speaker 3: need to have a chat with somebody, and they will
43:58
Speaker 3: negotiate with you. And it's not necessarily you having to
44:02
Speaker 3: call and fight for your life and negotiate really hard
44:05
Speaker 3: to get a bet alone like, that's not what we're doing.
44:07
Speaker 3: They might actually turn around and be like, George, we
44:09
Speaker 3: totally get it. How about we freeze your mortgage for
44:12
Speaker 3: a couple of months and that could actually give you
44:14
Speaker 3: the financial freedom to build up a small emergency fund
44:18
Speaker 3: so that when you do get back on your feet,
44:20
Speaker 3: or once you've had those two months to freeze or
44:23
Speaker 3: whatever they might be able to give you, you feel
44:26
Speaker 3: a little bit more financially confident. They might be able
44:29
Speaker 3: to refinance it. So that your mortgage or payments are lower.
44:32
Speaker 3: They might actually have a number of financial hardship things
44:35
Speaker 3: that you can lean on. And I think that the
44:38
Speaker 3: most important thing here is too often and I have
44:42
Speaker 3: this conversation in the She's on the Money community, I
44:45
Speaker 3: will recommend to somebody to contact a bank or contact
44:48
Speaker 3: somebody and explain that you're experiencing financial hardship. People be like,
44:52
Speaker 3: but I'm not homeless. Oh but I do have an income.
44:56
Speaker 3: Oh but Victoria, No, no, I'm not experiencing financial heart Like
45:01
Speaker 3: I have a thousand dollars in savings, and like, I
45:03
Speaker 3: totally get that there might be this stigma around what
45:07
Speaker 3: is and isn't financial hardship. But financial hardship is when
45:11
Speaker 3: money is stressing you out, and regardless off your financial
45:14
Speaker 3: situation or what you do and don't believe, is financial hardship.
45:18
Speaker 3: If you are feeling stressed about money, we shouldn't feel
45:21
Speaker 3: that way. We should be talking about this. We should
45:24
Speaker 3: be having conversations with people. We should be calling up
45:27
Speaker 3: our mortgage company and being like, hey, is there anything
45:29
Speaker 3: I can do? And maybe they'll say no, But that's
45:32
Speaker 3: when we can reach out to our friends at the
45:33
Speaker 3: debt free hotline like they're honestly angels, and I'm never
45:36
Speaker 3: paid to talk about them. In fact, we've never even
45:39
Speaker 3: talked about it. I just am such a big fan
45:41
Speaker 3: of their work and what they do. They can help
45:44
Speaker 3: you with free financial counseling and again, you don't have
45:47
Speaker 3: to be experiencing the worst financial hardship you can even
45:51
Speaker 3: think of to be able to reach out and use
45:53
Speaker 3: their services. Money is stressing you, that is financial hardship.
45:58
Speaker 3: Please use these services exist for a reason, So I
46:01
Speaker 3: think that my words of wisdom there would be having
46:04
Speaker 3: a look at that obviously having look at your budget
46:06
Speaker 3: and cash flow and making sure that you are, you know,
46:08
Speaker 3: spending within your values and what needs to be spent.
46:11
Speaker 3: But absolutely rely on the professionals here.
46:14
Speaker 2: Again, yeah, I've really well said there v as usual guys,
46:18
Speaker 2: if you did love today's property focused podcast, then please
46:22
Speaker 2: remember to check out the Property Playbook. That's where Victoria Devine,
46:26
Speaker 2: herself and our friend Amy Lunardi, who is a home
46:29
Speaker 2: buying genius, they go deep on all things properties. So
46:32
Speaker 2: if you haven't listened already and you are interested in
46:35
Speaker 2: home buying, or you already have brought a home, that
46:37
Speaker 2: is the place to go. V Lord, I think that
46:39
Speaker 2: is all we have time for today.
46:41
Speaker 3: It is all we have time for. But Jay, just
46:43
Speaker 3: before we head off, we'd like to acknowledge and pay
46:45
Speaker 3: respect to Australia's Aboriginal and torrist Raight Islander people's. They're
46:49
Speaker 3: the traditional custodians of the lands, the waterways and the
46:52
Speaker 3: skies all across Australia. We thank you for sharing and
46:56
Speaker 3: for caring for the land on which we are able
46:58
Speaker 3: to learn. We pay our respects the eldest past and present,
47:01
Speaker 3: and we share our friendship and our kindness.
47:03
Speaker 2: And to remember, guys, that the advice shared on She's
47:06
Speaker 2: on the Money is general in nature and does not
47:08
Speaker 2: consider your individual circumstances. She's on the Money exists purely
47:13
Speaker 2: for educational purposes and should not be relied upon to
47:16
Speaker 2: make an investment or a financial decision. Victoria Devine is
47:19
Speaker 2: an authorized representative of Infocused Securities Australia Proprietary Limited eight
47:24
Speaker 2: and four seven zero nine seven seven nine seven zero
47:28
Speaker 2: four nine AFOSL two three six five two three.
47:31
Speaker 3: Oh, she got that one out. Good works. G Let's
47:37
Speaker 3: see how you go on Friday. Bye guy, Bye guys,