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What would you do with $1,200 extra each month? · That Home Loan Hub

• 0:10
  SPEAKER_01: Hello and welcome back to that Home Loan Hub.
• 0:14
  SPEAKER_01: Today we are going to talk about, I completely forgot what.
• 0:18
  SPEAKER_00: Um what repayments were last year versus what they are this year with the recent changes in interest rate this week as well.
• 0:29
  SPEAKER_00: So oh my gosh, that's right.
• 0:30
  SPEAKER_00: That's right.
• 0:31
  SPEAKER_00: The rates are falling down.
• 0:34
  SPEAKER_01: And what does it mean to you guys?
• 0:36
  SPEAKER_01: What does it mean and what difference it makes to your life and your living cost and your repayments?
• 0:43
  SPEAKER_01: So um we thought about a scenario that we've recently been talking to a client about, right?
• 0:48
  SPEAKER_01: And they're coming off very, very high interest rates, 7% last year.
• 0:52
  SPEAKER_01: Yep.
• 0:52
  SPEAKER_01: Yep.
• 0:53
  SPEAKER_01: 7%.
• 0:53
  SPEAKER_01: That's crazy.
• 0:54
  SPEAKER_01: Crazy.
• 0:55
  SPEAKER_01: If you think about it, right?
• 0:56
  SPEAKER_01: And that's when people even had 20% deposit.
• 0:59
  SPEAKER_01: Now we have people that don't have 20% deposit and they don't even have 7%.
• 1:03
  SPEAKER_00: No, that's right.
• 1:04
  SPEAKER_00: Even with the low equity premium on top of you know the current rates, they're not even hitting 6.8.
• 1:12
  SPEAKER_00: Like they're going to 5.5.
• 1:14
  SPEAKER_00: Exactly.
• 1:15
  SPEAKER_00: Exactly.
• 1:16
  SPEAKER_00: Awesome to see.
• 1:17
  SPEAKER_01: So what we thought we will show you, what does it look like if you had a loan of 700,000 right over 30 years?
• 1:26
  SPEAKER_01: Yep.
• 1:26
  SPEAKER_01: At 7%, you would have been paying$4,657 a month.
• 1:35
  SPEAKER_01: So almost five grand a month will be going towards your home loan repayment.
• 1:40
  SPEAKER_01: To be honest, when we do a joint application, that's one person's salary.
• 1:45
  SPEAKER_01: Absolutely gone towards paying um home loan.
• 1:49
  SPEAKER_01: So if we were to model on our current interest rates, and this is the important bit where the advisor help comes in, right?
• 1:59
  SPEAKER_01: Because we ask you questions.
• 2:01
  SPEAKER_01: What is important to you?
• 2:02
  SPEAKER_01: Is it the cash flow or is it paying down your mortgage faster?
• 2:06
  SPEAKER_00: Yeah.
• 2:07
  SPEAKER_01: Because this is the two avenues that you're going.
• 2:09
  SPEAKER_01: Now, the current uh what's the lowest interest rate at the moment?
• 2:12
  SPEAKER_00: Well, 4.49 for one year is what we've seen um in the major banks.
• 2:18
  SPEAKER_01: And uh and this is ahead of OCR review.
• 2:20
  SPEAKER_01: Correct.
• 2:21
  SPEAKER_01: They're all dropping the rates.
• 2:22
  SPEAKER_01: What the heck is going on?
• 2:23
  SPEAKER_00: Yeah.
• 2:24
  SPEAKER_00: So um I'm excited to see um what they're gonna do next week uh after the announcement as well.
• 2:31
  SPEAKER_01: Yeah, exactly.
• 2:32
  SPEAKER_01: So let's um base it on 4.49 per month over 30 years.
• 2:38
  SPEAKER_01: Their repayments will drop a whooping almost thousand dollars more per month than what they are right now.
• 2:45
  SPEAKER_01: So the new monthly repayments will be 3543.
• 2:50
  SPEAKER_01: Wow, yeah.
• 2:51
  SPEAKER_01: The previous one was four, six, nine, seven.
• 2:53
  SPEAKER_01: So as you can see, it's almost 11,$1,200 difference a month.
• 2:58
  SPEAKER_01: Yeah.
• 2:59
  SPEAKER_01: Right?
• 2:59
  SPEAKER_01: And this is crazy because this is where you go, okay, I can actually have$1,200 back into my pocket.
• 3:07
  SPEAKER_01: Um, maybe I don't need to work 50 hours a week anymore.
• 3:11
  SPEAKER_01: Maybe we can actually afford to buy nicer food.
• 3:14
  SPEAKER_01: Yeah, um, maybe we can take a trip.
• 3:16
  SPEAKER_00: Yeah, you know, and if you break it down to weekly, because I know some of our listeners like to do a weekly budget as well, that's$324 back in your pocket a week.
• 3:28
  SPEAKER_00: That's crazy.
• 3:29
  SPEAKER_00: Yeah.
• 3:30
  SPEAKER_01: Are you sure?
• 3:32
  SPEAKER_01: That sounds like a lot of money.
• 3:34
  SPEAKER_01: It is, it is, it is, yeah.
• 3:35
  SPEAKER_01: It is, but it's it's crazy.
• 3:38
  SPEAKER_01: Yeah, however, with this couple that we sat down with, and I said, Look, guys, what if you repay?
• 3:44
  SPEAKER_01: Like, is it actually affordable for you to pay right now?
• 3:46
  SPEAKER_01: They're like, Yeah, actually, we can manage.
• 3:48
  SPEAKER_01: You know, we're used to it now, we can manage.
• 3:50
  SPEAKER_01: I say, cool.
• 3:50
  SPEAKER_01: If we actually model on the same repayments that you're doing right now, you're gonna save 11 years of your mortgage.
• 3:58
  SPEAKER_01: Wow.
• 3:58
  SPEAKER_01: Straight away.
• 3:59
  SPEAKER_01: We went from 30 years to 19.
• 4:01
  SPEAKER_01: Yeah.
• 4:01
  SPEAKER_01: Just like that.
• 4:02
  SPEAKER_01: Yeah.
• 4:02
  SPEAKER_01: Without any changes to their lawn repayments.
• 4:05
  SPEAKER_01: Yeah, just the interest rate makes a huge difference.
• 4:09
  SPEAKER_01: Yep.
• 4:09
  SPEAKER_01: So if you are that kind of um client that's okay with paying what they're paying right now, keep your repayments the same.
• 4:18
  SPEAKER_00: Yeah.
• 4:18
  SPEAKER_00: If you're comfortable with it and you've been managing, continue to do so with the lower interest rate because you'll wipe years off your home loan, you'll wipe interest.
• 4:27
  SPEAKER_00: Like you won't be paying that much interest on that home loan as well, your interest costs.
• 4:31
  SPEAKER_01: And imagine if the things are going along the same way as they are right now, and let's say you fix this for a year, next year you come up, and now the interest rates are 3.5.
• 4:41
  SPEAKER_01: Me, which is thinking.
• 4:43
  SPEAKER_01: Um, but if we model at 3.5, your repayments drop again by another$400, you know, a month.
• 4:51
  SPEAKER_01: And if you kept the repayments the same, you're gonna save another three years of your mortgage.
• 4:57
  SPEAKER_01: So every time the rate drops, keep your repayments the same, you're gonna shed, shed, shed years of your mortgage.
• 5:06
  SPEAKER_01: Shave, shave.
• 5:07
  SPEAKER_01: I think this is what I was trying to do.
• 5:09
  SPEAKER_00: Oh shed and shave, same context.
• 5:11
  SPEAKER_01: Trying to combine two words together.
• 5:13
  SPEAKER_01: Awesome.
• 5:14
  SPEAKER_01: So um, for this client specifically, they were fixed for a longer term because they were freaking out at the time when the rates were high, and they're fixed for like three, four, five years mortgage, uh, despite their advisor.
• 5:32
  SPEAKER_01: Um, but that's okay, that's okay.
• 5:34
  SPEAKER_01: So one of their loans is coming out for refix in January.
• 5:36
  SPEAKER_01: They can fix that portion.
• 5:38
  SPEAKER_01: Yeah, so that's cool.
• 5:39
  SPEAKER_01: The other two portions are coming up in the following years.
• 5:42
  SPEAKER_01: Yeah, the break fee on those was about$15,000.
• 5:45
  SPEAKER_01: Uh-huh.
• 5:46
  SPEAKER_01: But when we've calculated how much they can actually save by going onto the lower rate, they can save$18,000.
• 5:53
  SPEAKER_01: Oh, wow.
• 5:54
  SPEAKER_01: So they're still$3,000 better off by refixing, by breaking and fixing.
• 5:59
  SPEAKER_01: Breaking and refixing, yeah.
• 6:00
  SPEAKER_01: Yeah.
• 6:01
  SPEAKER_01: So um, again, this is where the power of advisor comes in.
• 6:05
  SPEAKER_01: This is where you gotta understand your options and actually do real numbers crunching.
• 6:12
  SPEAKER_00: Have they broken it?
• 6:13
  SPEAKER_00: They're thinking about it.
• 6:14
  SPEAKER_00: Okay, so one thing I I want to point out is if they are thinking about it with the OCR coming up next week, if they want to break, they should break now before OCR.
• 6:27
  SPEAKER_00: Because if they break after OCR, that break fee may be higher because of the movement and interest rates.
• 6:36
  SPEAKER_00: That's exactly what I said to them as well.
• 6:37
  SPEAKER_00: Something to be mindful of.
• 6:39
  SPEAKER_01: And remember, when we give you the quotes for the break fees, they're only valid for that day until 4 p.m.
• 6:45
  SPEAKER_00: Yeah.
• 6:45
  SPEAKER_01: Um, so if we give it to you in the morning, you have to make decisions by 4 p.m.
• 6:48
  SPEAKER_01: Otherwise, the next day it will be changed again.
• 6:50
  SPEAKER_01: Yep.
• 6:50
  SPEAKER_01: It will be probably more in the client environment current climate that we're in, current environment that we're in.
• 6:59
  SPEAKER_01: So um just be aware of that.
• 7:01
  SPEAKER_01: The other thing to be aware of that people don't realize the break fee has to be paid up front.
• 7:05
  SPEAKER_01: Yes, the whole amount.
• 7:06
  SPEAKER_01: So let's say if the break fee is 15k, you've got to find that money out of somewhere.
• 7:11
  SPEAKER_01: Yep.
• 7:11
  SPEAKER_01: And often people don't have that money.
• 7:13
  SPEAKER_01: So this is where refinancing and topping up your loan can be handy.
• 7:19
  SPEAKER_01: Yeah, but again, we do the numbers for you because you're adding suddenly that 15k onto your loan over 30 years.
• 7:25
  SPEAKER_01: Yes.
• 7:25
  SPEAKER_01: Are you actually better off?
• 7:27
  SPEAKER_00: Yeah.
• 7:27
  SPEAKER_01: So maybe you're not.
• 7:28
  SPEAKER_01: You know, maybe you should stay where you are and just suffer through.
• 7:32
  SPEAKER_01: But that's why you talk to your advisor.
• 7:35
  SPEAKER_01: Exactly.
• 7:35
  SPEAKER_01: By the way, none of this is a financial advice.
• 7:38
  SPEAKER_01: If you want a proper financial advice, please feel free to reach out to us and um we'll let you know how it is.
• 7:44
  SPEAKER_01: Yeah.
• 7:44
  SPEAKER_01: Awesome.
• 7:45
  SPEAKER_01: Anything else to add, Conch?
• 7:47
  SPEAKER_00: No, I just think um the current environment and landscape of the interest rate world is looking quite positive with the rates coming back to the four and a halves, which uh was a big shock and surprise because we didn't think that it would happen this soon.
• 8:06
  SPEAKER_00: Because we did say we'll see four and a half by the end of the year.
• 8:09
  SPEAKER_01: We did, we did, and then literally the week after, it happened.
• 8:13
  SPEAKER_01: So, yeah.
• 8:13
  SPEAKER_01: So, this is a bit we should say three and a half.
• 8:16
  SPEAKER_01: Three and a half, let's go universe.
• 8:18
  SPEAKER_01: Because it sounds like you and I can manifest those things.
• 8:21
  SPEAKER_01: Okay, awesome.
• 8:22
  SPEAKER_01: Thank you so much for this episode, guys.
• 8:24
  SPEAKER_01: Remember, if you've got any ideas for the next topics that you would like us to cover, we're here for you.
• 8:29
  SPEAKER_01: Feel free to reach out and um feel free to also flick through the previous episodes because we do cover quite a lot.
• 8:36
  SPEAKER_01: And if you're in a position where you're thinking, maybe, maybe not, am I you know eligible, maybe not, you won't know until you sit down with us and we tell you.
• 8:45
  SPEAKER_01: Yeah.
• 8:45
  SPEAKER_01: Don't let your voice in your head tell you.
• 8:47
  SPEAKER_01: Your voice in your head is not a financial advisor.
• 8:50
  SPEAKER_01: We are.
• 8:50
  SPEAKER_01: So feel free to reach out.
• 8:52
  SPEAKER_01: We uh don't charge you anything, we're free, and we will point you in the right direction.
• 8:56
  SPEAKER_01: Cool.
• 8:56
  SPEAKER_01: Thank you, and see you next time.
• 8:58
  SPEAKER_00: Bye.