Latest / Making Cents / The Mortgage Advice That Fails in NZ: With Aaron Cattell (The Mortgage Man)

Transcript

The Mortgage Advice That Fails in NZ: With Aaron Cattell (The Mortgage Man) · Making Cents

• 0:00
  Somewhere on your for you page right now, there's a mortgage tip.
• 0:03
  It sounds confident, it sounds smart, and there's a real chance it's about to cost you money.
• 0:10
  Social media is a bit of a mixed bag when it comes to money advice, to put it mildly.
• 0:16
  Sometimes it's a genuinely great tip that you'd never have found otherwise.
• 0:22
  And sometimes it's a straight up myth.
• 0:25
  So today we're fact checking it all.
• 0:28
  The mortgage takes doing the rounds.
• 0:30
  Whether it's that too good to be true way to buy investment property, or the credit score panic, we're finding out what actually survives Contact with a real mortgage advisor, Aaron Cattell, otherwise known as the Mortgage man, and he
• 0:44
  has seen and heard it all.
• 0:46
  Do people really think that if there was a way to not pay interest on a mortgage that the bank wouldn't have figured it out pretty quickly and close that loophole?
• 0:54
  And look, some of these social media hacks can sound good until you run them past a professional.
• 1:01
  It may not be the best financial decision to own a house, but that doesn't mean you shouldn't do it.
• 1:08
  And it matters for two very different reasons.
• 1:10
  First, you might be losing sleep over something that just doesn't matter at all.
• 1:16
  But second, you could be following something that sounds smart but is actually about to cost you thousands.
• 1:24
  5% of the loan amount per year can be paid as extra during fixed terms without any penalties.
• 1:31
  For the average mortgage, that saves like pretty much half of it gone.
• 1:35
  So welcome to Making Sense.
• 1:36
  It's the podcast people who want financial freedom without giving up their coffee.
• 1:40
  I'm Frances Cook, a financial journalist and fellow financial freedom seeker who makes money simple for you and today we're fact checking your mortgage TikToks.
• 1:51
  This episode of Making Sense is supported by Odoo the All in one solution to make running your business smoother and more affordable.
• 1:58
  Go to odoo.com, that's O D double O dot com for more.
• 2:02
  I want to help as many people as possible reach financial freedom by taking control of their money.
• 2:07
  And you can help me in that mission two really easy ways.
• 2:11
  First, hit subscribe wherever you like to listen, YouTube, Spotify, Apple Podcasts, or any other podcast player.
• 2:18
  Then send this episode to a friend so we can all level up our money together.
• 2:22
  Then the show grows and I can keep giving you the money info that makes a difference to your life.
• 2:28
  Welcome Aaron.
• 2:29
  So good to have you back.
• 2:30
  In your previous episode absolutely popped off.
• 2:32
  People loved your no nonsense advice.
• 2:34
  We've got you back for more because you and I both spend far too much time melting our brains on social media and contributing to the brain melt.
• 2:42
  But you do see some stuff while you're there trying to put out good information.
• 2:48
  I personally see a lot of stuff that I'm like, whoa, that's some bad information.
• 2:52
  I'm sure you see the same.
• 2:53
  Are there any sort of like red flags or things that often set off your nonsense indicators when you're on social media?
• 3:04
  Yes, plenty.
• 3:05
  Thanks for having me back.
• 3:05
  I mean, yes, social media is the wild, wild west, right?
• 3:08
  Anyone can post a video, anyone can leave a comment, even if you have a little dog or a cat as your profile picture.
• 3:14
  So yeah, usually if it's from overseas, it's kind of like if you see a video, it's gone viral.
• 3:20
  Usually there's two very polar opposite sides and that's probably why it has so many views.
• 3:26
  And you're like, oh, about this and the comments that I get.
• 3:30
  The comments that you get can also kind of put people off or like lead them down a path of why don't you do this?
• 3:37
  Says somebody with username 197700.
• 3:41
  But like, even that comment can plant other ideas in people's heads and then they go down this road of I don't know where they get bad advice and stuff like that.
• 3:52
  And I think even added to it is that sometimes those people that are in the comments, they're questioning or they don't even believe that the person that's got a blue tick and does this for a job and has
• 4:03
  a business and helps 20 to 30 first home buyers every single month buy houses, like, of course I know what I'm talking about.
• 4:10
  But they like, oh, you don't know what you're talking about because in Australia or in America, they do it this way or my uncle did it this way.
• 4:18
  Yeah, there's comments that set me off, I suppose.
• 4:22
  But Also those viral 6 seconds post, 6 second posts that are just like, you should do it this way, here's why.
• 4:29
  And then it doesn't actually work.
• 4:33
  And I think specifically you kind of asked me about that one post that you saw, right?
• 4:37
  Yeah, 100%.
• 4:39
  But so first on that.
• 4:40
  So your red flags would be lack of nuance.
• 4:43
  So basically if they're doing a couple of lines and saying this works for everyone, red flag, which yes, because money can be so different based on your situation and then anything from overseas can work so differently.
• 4:55
  I mean, I think Australia has some similarities, but again, a lot of differences.
• 5:00
  Still, anything from American can be so different.
• 5:03
  So those would be your two main red flags.
• 5:06
  Your, your nonsense sirens go off on either of those.
• 5:09
  Yeah.
• 5:09
  I also add though is like the videos that I do average one minute long.
• 5:14
  Like, although it is potentially good advice, like, you still have to take that with a big picture view because I might say, know an offset account is great, but like, for some people it's not great.
• 5:27
  So, like, that's why we do these videos is like, here's a little sample of how I can show my expertise.
• 5:34
  But you should still be getting individual financial advice when it comes to your mortgage and buying a house, because that house might be freehold and I'm talking about cross lease.
• 5:42
  You have to make sure it's relevant to what your situation is.
• 5:45
  And there's no real way of knowing that unless I spoke to you directly kind of thing.
• 5:49
  Yeah.
• 5:49
  The difference between general information versus individual situational advice.
• 5:55
  Okay, let's rip through some of these things that we see around and starting with sort of the idea of the overseas examples, because in America you see all the time this, should you rent a house or should you
• 6:09
  buy a house?
• 6:10
  Maybe you could get further ahead if you're renting.
• 6:12
  And it is this enduring debate and the way that they would run the numbers and the ground on which they would run those numbers is so different.
• 6:21
  So what do you think on rent versus buy in New Zealand?
• 6:25
  This is a very loaded question.
• 6:27
  And I'm just like, how do I position?
• 6:29
  Straight to the deep end.
• 6:30
  Yeah.
• 6:30
  So I guess like you can see like the mega billionaires in America, you've got like Grant Caldone that says, you know, I would never own a house because it's a liability and all that stuff, it's better to rent
• 6:41
  and all that stuff.
• 6:41
  And I think it comes down to why you want to buy and why you want to rent.
• 6:47
  Because it may not be the best financial decision to own a house, regardless of if you're putting money into it, investing or renting or whatever.
• 6:56
  But that doesn't mean you shouldn't do it.
• 6:58
  A comparison would be, it's not the best financial decision to have children.
• 7:03
  People still have children because it brings them joy and it's probably the best thing you'll ever do.
• 7:08
  But if you want to buy a house and you're looking at it from that lens of is this a good investment or could I put my money elsewhere, then there's a few things you need to consider because you've
• 7:22
  got the cost of the mortgage and people usually compare the cost of the mortgage to the cost of Rent, you have a million dollar house today, the mortgage might cost a thousand dollars per week.
• 7:33
  You could probably rent that same house for $700 per week.
• 7:36
  So you're thinking immediately, oh well, I'm going to save $300.
• 7:40
  And if you were savvy, you'll invest that into something.
• 7:43
  But most people don't invest the full $300.
• 7:45
  They spend it on stupid stuff.
• 7:47
  But let's just say you're very strict.
• 7:49
  You're like, there's $300, I'm going to go invest it somewhere else and get like a 7%, 10% return, whatever.
• 7:54
  But then $700 for your rent doesn't stay $700 for the same duration of time that you have a mortgage.
• 8:02
  You know, it usually goes up.
• 8:03
  Everything goes up apart from a mortgage because the interest rates kind of hover between like a 3 and a 6%.
• 8:11
  So if you buy today, you get a 5% interest rate.
• 8:14
  The repayment is a thousand dollars.
• 8:16
  Maybe in a couple of years time it might slightly go up because the interest rate's gone up and it might slightly come down.
• 8:22
  It's like you go up, slightly come down and you kind of just hover around that same kind of repayment amount.
• 8:28
  Whereas with rent historically, it's more likely just to keep going up on average because I know at the moment we kind of stayed a bit flat.
• 8:36
  But like in 10 years time, is that rent still going to be $700 per week?
• 8:40
  No, probably not.
• 8:42
  Is the mortgage probably around that same range?
• 8:45
  Because you don't have the same inflationary pressures because it's debt that you're paying off rather than rent or whatever you're paying.
• 8:53
  So if you're going to go down that argument of I'm going to rent for my whole entire life, for the rest of my life and invest the difference, and then when I have enough money to, you know, pay
• 9:07
  for the house in cash, I kind of just don't really buy that idea.
• 9:11
  Because let's say it takes you 10 years to get enough, enough money to buy a house in cash.
• 9:17
  It's not a million dollars anymore because again, house prices usually go up.
• 9:21
  So you're kind of chasing your tail.
• 9:24
  And yes, it's probably not the best financial decision to buy a house.
• 9:29
  But if you bought it soon as possible, when it was cheaper, paid off the mortgage faster, or just paid the minimum repayments and then invest the rest of the money elsewhere, if you take a big view, like a
• 9:42
  long term view of that, I think that is probably still what makes it a Good investment compared to just saying I'm renting for the rest of my life.
• 9:52
  And I think I was seeing a short from someone you had on here.
• 9:57
  What was her name?
• 9:57
  Janneke.
• 9:58
  Janika, yeah.
• 9:59
  The stuff property reporter.
• 10:00
  Yeah.
• 10:00
  And she said something that kind of is quite a familiar kind of mindset that people have, is like, I bought a home thinking it would be a good investment.
• 10:10
  It's not automatically going to be a good investment.
• 10:12
  Homes can be good investments.
• 10:14
  They can also be terrible investments.
• 10:16
  Like if you said to me, I want to buy a house to live in and I want to make money from it, I would be saying, buy something you can add value to and actively increase its value faster
• 10:28
  than what the market can do.
• 10:29
  Because people are still like, which area do you think I should buy into?
• 10:32
  Increase my capital growth.
• 10:34
  I'm like, I can't predict the future, I can't.
• 10:36
  Like, nobody knows the answer to that question.
• 10:38
  You could say good areas are going to grow faster, but they've already grown and they're going to be more expensive.
• 10:44
  If you can find a house where you can add value to it yourself, that's how you can control how quickly it's going to increase in value.
• 10:53
  Adding a bedroom, adding a bathroom, subdividing the land off the back, stuff like that is a sure way to increase its value rather than crossing your fingers and hoping that the market does it for you.
• 11:04
  I think that's the thing, is that there were very big jumps in the property market for a long time, that that sort of got entrenched as a.
• 11:13
  Oh, that's, that's what you do.
• 11:15
  You buy a house and it goes up so much.
• 11:17
  And I think again, nobody knows the future.
• 11:20
  Right.
• 11:20
  But there's signs that that automatic cycle has at the very least tailed off.
• 11:26
  Whereas like you say, having a strategy and, and planning out different things, that's entirely different.
• 11:32
  And I think this is what makes the whole rent verse buy debate really tricky.
• 11:38
  And people land on such different sides of it is because there can be genuinely such different ways of making it work depending on the strategy that you take.
• 11:50
  And it's such an intersection of the lifestyle factors versus the financial factors.
• 11:56
  And you have financial theory come crashing into the way people live their lives.
• 12:02
  And so having your home and paying off the mortgage is simply not necessarily the slam dunk it was.
• 12:09
  Whereas.
• 12:10
  And then people take that and go running the other way and say everyone should be renting forever.
• 12:15
  And I'm like, I just don't know if either one's true.
• 12:19
  Like people project Their own biases.
• 12:21
  Right?
• 12:22
  Like if I was 20 again, I could rent for 200 bucks a room.
• 12:28
  It'd be a fun lifestyle.
• 12:30
  If I really wanted to like invest the rest of my money, I could, but I'd probably just spend it because I'm 20.
• 12:36
  But you know, it depends on the stage of life.
• 12:39
  There's the emotional part to it as well because people maybe just are sick of renting because they hate the landlord coming over every three months to do inspections.
• 12:46
  They don't like the fact that maybe the rent is going to go up.
• 12:50
  Whereas the flip side of that is they love the idea that their landlord fixes everything for them and they would have to look after that themselves if they own their own homes.
• 12:58
  So there's pros and cons to both.
• 13:00
  I don't know, I just feel like maybe it is bias.
• 13:03
  Like buying a home is like the goal of most New Zealanders and I feel like you tick off that big adult goal, you can get on with the rest of your life.
• 13:12
  And then by the time you're 60, if you pay it off the slow way, then you have this mortgage free property and then you don't have to worry about, you know, where am I going to get money for
• 13:23
  the rent?
• 13:23
  Because that's the other part of this whole thing, right?
• 13:25
  Is if you just choose to do the rent option, what happens when you retire?
• 13:30
  Yeah, like you still have to pay for rent and yes, maybe you've invested so much money over the last 30 years that you can cover the rent, but that's going to be pretty frustrating that you're spending it on
• 13:39
  an expense when you could just have a mortgage free profit.
• 13:42
  Okay, so wherever someone lands on this, whether they're renting or buying, are there ways, do you think, to organize your finances so that either one could work better for you, to be smarter for you?
• 13:56
  If you make more money, life's going to be easier whether you're renting or if you're buying.
• 14:01
  And I think people get very focused on those smaller details of like, should I invest in this or invest in that, should I pay, should I pay monthly or 490 on my mortgage.
• 14:13
  But like, if you focus on earning more money, therefore you're going to have more money to play with and therefore you're going to have more money to pay on your mortgage and invest and all that other stuff.
• 14:21
  So if we assume that you have a fixed income for the rest of your life, which guess for some people that is the reality and you have no idea how to earn extra income so how can you set
• 14:33
  some rules, I suppose, for yourself in terms of how do I make the most amount of money?
• 14:37
  I'm going to buy a house, how to make the most amount of money, I'm going to rent.
• 14:42
  I guess from the renting perspective, you would want to keep your overheads as low as possible, keep your rent as low as possible, and make sure you're investing your money in things that suit your risk appetite.
• 14:52
  The same thing applies with buying a house.
• 14:55
  If you borrow as much money as possible as you can from the bank, that means you have less money to put into other things.
• 15:04
  And you still have to remember that although you might class or some people might class a house or a home as a liability or an investment, that it doesn't really matter.
• 15:14
  You still have to pay money for it and it doesn't give you money while you're living it.
• 15:19
  So if you want to be smart about it, you should be buying a house within your means and still have money left over to invest elsewhere or make extra payments.
• 15:30
  Because just because the bank says, I'm going to give you the max amount of money doesn't mean you should take it.
• 15:35
  Generally speaking, first home buyers in New Zealand should definitely not be maxing out what their mortgage repayments are going to be because they still have to think about emergency funds, they still have to think about potential future overheads.
• 15:49
  And how do I make my money make more money for me?
• 15:52
  You're creating that overall financial stability.
• 15:54
  And I think that's the bit that gets lost in the debate, is like, one thing shouldn't be your strategy, basically, at any point with your money.
• 16:01
  And property has been such a winner for people that I think people can absolutely go all in on that.
• 16:07
  Here's another one that I've seen floating around and it was an interesting strategy, especially if we're talking about property as an investment.
• 16:17
  So this is taking the idea of we're going to get you a true property investment.
• 16:21
  The idea is if you're in a couple and you're trying to buy your first home, they're saying, don't buy that first home together.
• 16:32
  One person buys a home, the other person then uses their savings and buys another home.
• 16:37
  You've got a home you can live in together and an investment property, which, I mean.
• 16:42
  Yeah, that sounds amazing.
• 16:44
  Does it work?
• 16:45
  This is the video that you commented on and it was like it had millions and millions of views.
• 16:50
  Yeah, it was American.
• 16:51
  And it basically said, don't buy as a couple because then you're going to miss out on the benefits they give you as a first home buyer.
• 16:59
  So it'd probably be the same as like in New Zealand if we still had the first home buyer grant or being able to use your kiwi saver.
• 17:05
  It's like buy one person, use their kiwisaver by themselves, and then years later the next person buys, uses their kiwisaver.
• 17:14
  So, and I do have clients that, that think this is a good way of doing things to get two houses, but it's not that simple because you still have to apply for a mortgage.
• 17:23
  And in New Zealand, a single person getting a mortgage by themselves usually needs to have pretty high income.
• 17:30
  Then if you're going to buy a second house, you're now putting that person with the second person.
• 17:36
  You still need pretty high income because you still got a mortgage on the original house.
• 17:41
  And yes, you could say that we're going to factor in rent because it's now going to be an investment, but that doesn't really cancel out the mortgage repayments anymore.
• 17:48
  Would it work in America?
• 17:50
  Probably if you had high income.
• 17:52
  Would it work in New Zealand?
• 17:54
  Probably if you had high income.
• 17:56
  Is there a different way?
• 17:58
  Buy a house with your partner, buy something well that you can add value to, maybe turn that into the investment property, and then go buy another house with your partner.
• 18:05
  Putting your two incomes together from the beginning is probably going to be an easier way to do it.
• 18:11
  Use both your kiwi savers and just say, cool, we're going to buy one house together and then we're going to buy two houses together.
• 18:17
  Because the whole point of that post was, here's how you get two houses as fast as possible.
• 18:22
  You can get two houses faster, probably by joining forces.
• 18:25
  Yeah.
• 18:26
  And especially when I think about, in the New Zealand context, you're not allowed to use your kiwisaver for an investment property.
• 18:31
  So are these people planning to lie and say that they're living in this when they're actually not and they're renting it out?
• 18:37
  Not a good idea to fib on this stuff.
• 18:39
  People often get caught.
• 18:41
  And then as well, we've got the higher deposit requirements for if it's an investment property.
• 18:46
  Again, are you?
• 18:47
  Don't lie to your bank.
• 18:48
  I'm not even going to put that out as a hypothetical.
• 18:50
  Just don't.
• 18:51
  There is, there is ways, which I'm putting, I'm putting on the record since this, since it's in the podcast.
• 18:59
  Go on, let's just like workshop this.
• 19:01
  So if me and my partner bought a house our first time, we both Used our Kiwi savers, we lived in the house and then years later we decided we wanted another property.
• 19:11
  We have our mortgage with bank A.
• 19:14
  And then we say, well, we want to buy another home.
• 19:18
  We don't quite have 20% deposit because house prices, we haven't saved whatever.
• 19:23
  But they've got good incomes.
• 19:24
  So in theory, if they could service both mortgages, we would split bank and go to a second bank and say, hey, here's at least 10% deposit for these guys to buy their new home, which they're going to live
• 19:36
  in.
• 19:37
  And as long as the servicing works, they could then get that mortgage approved with a 10% deposit.
• 19:42
  So you can buy a second home with a 10% deposit as long as you are actually going to genuinely live in there because it's still classes that.
• 19:49
  And then you would basically just move from the old house to the other, to this new house, live in it.
• 19:55
  And yes, you'd have low equity margins because you bought it with a less than 20% deposit.
• 20:00
  The other house, that would be turned into an investment property, like you haven't told, like you haven't.
• 20:06
  That's not the right.
• 20:07
  Whereas is, you don't need to, like, situations change, right?
• 20:12
  You know, you don't need to say to the other bank, is it okay that we go and move out of this property?
• 20:16
  No, you just need to make sure that you can service both mortgages.
• 20:20
  That's the bit.
• 20:22
  Oh my gosh, you're like, is this legal?
• 20:24
  Is this in the gray area?
• 20:25
  No, it's not.
• 20:26
  It's not a gray area at all.
• 20:27
  It's one thing that lots of people do because like, you want to hold on to one house at this.
• 20:33
  In this market, selling a house, if you bought it five years ago, four years ago, three years ago, there isn't going to be much profit, there's not going to be much equity.
• 20:41
  But they're just like, you know, that house is in Auckland.
• 20:44
  We want to move to Christchurch.
• 20:46
  We've got jobs in Christchurch.
• 20:47
  Can we afford to hold onto both?
• 20:50
  And the answer would be yes, as long as you can service it and you've got a deposit to buy another property.
• 20:55
  The different bank.
• 20:57
  So it's called split banking and yes, it's legal, unless it's not.
• 21:02
  And I've been doing all these mortgages,.
• 21:05
  Hopefully we're fine.
• 21:06
  It's.
• 21:06
  Yeah, it is.
• 21:07
  No, it 100% is.
• 21:08
  And it's one of those things that people don't realize, I suppose, because they are thinking one bank, because if they went to their own bank and said, hey, we want to, you know, get a second house.
• 21:25
  Can we do it?
• 21:26
  That bank will say, no, you don't have enough equity.
• 21:28
  It's too risky to have, you know, the security with us at, at this.
• 21:32
  So split bank and you move and you're focusing on the new lending of this new bank.
• 21:38
  And yeah, it works.
• 21:41
  So would that be, I mean, if someone is looking at these sorts of videos that might be coming in from America or wherever and they are wanting to quite quickly go from being I'm a homeowner to I'm a
• 21:53
  homeowner with an investment property too and looking at, like you said, the fastest way to have two properties, would this be the strategy or something else?
• 22:02
  I think it depends on the person because there's plenty, and myself included that bought their first home as an investment.
• 22:09
  They rent vested.
• 22:10
  So that's the process of I want to live impossibly because I like the lifestyle, but I want to get on the property market.
• 22:17
  So it's kind of like this renting versus buying thing as they're doing both as they are renting in a nice area, low overheads, buying in a area that they wouldn't live in, but they want to get on the
• 22:29
  property market.
• 22:30
  And then they obviously can't use the kiwisaver because they are buying it as an investment property, but they can still afford to own this property.
• 22:38
  So they have this house down in Hamilton or whatever somewhere close by.
• 22:43
  My first property was in Papakura and has been rented out basically.
• 22:48
  I think we've owned it for like 11 years.
• 22:50
  It's been rented out for like 10.
• 22:52
  And you know, that was a good launch pad to help me get equity to buy another property.
• 22:58
  And then when I bought the other property, obviously I couldn't use kiwisaver to get my second property because I still owned the other one.
• 23:05
  So if you are self employed or you just don't have a big kiwisaver, that might be a good way to do it because you're not like, oh I need my kiwi saver for the deposit kind of thing or
• 23:16
  you're buying with a partner for the second purchase, use their kiwisaver because it's their first home, not your first time.
• 23:22
  But that's okay because it's their first time.
• 23:24
  And then you could get two properties that way.
• 23:26
  But deposit and income are the two things that you have to have to get mortgages.
• 23:32
  And if you want two houses as quickly as possible, usually you need to have pretty good income to be able to do that.
• 23:40
  Because even if you found a rental property that I don't know was $500,000, the mortgage was $400 and the rent was $400 in the real world, it covers the mortgage.
• 23:51
  In the bank world, they scale that rent by 20, 25% because it has to cover in expenses and vacancy rates and stuff like that.
• 23:59
  And then they add a test rate on the mortgage to make sure you can afford it if rates go up.
• 24:05
  So in reality or in bank reality, that doesn't cover it.
• 24:10
  So you can't just keep buying houses that you know that, oh, $400, 400, like it doesn't match that way.
• 24:16
  So if somebody wanted to buy two houses as quickly as possible, you know, this is a conversation I have a lot with people is you're either going to buy an investment property first and say goodbye to using your
• 24:27
  kiwisaver.
• 24:28
  And that would be okay if you didn't have kiwisaver or much in it, or you just buy a house as your first time, you can add value to it, use a key, we save as add value.
• 24:37
  And then you're like, oh look, I've got some equity or I've saved.
• 24:42
  But the reality is that makes it is made so much easier when you've got high incomes because you still have to service both mortgages.
• 24:50
  Interestingly mention income because that is another one that I've seen.
• 24:54
  You put out some great info about where income is of course, obviously a huge factor, but a lot of the time people treat it as the only factor.
• 25:04
  How important is income in reality in terms of, you know, if we're looking at myth busting, is it the biggest factor or the only factor?
• 25:13
  It's kind of like the money doesn't buy you happiness kind of thing, but it does buy you holidays and jet skis and they do make you happy.
• 25:20
  I mean, you could look at an application and it isn't just income that the banks look at.
• 25:27
  You know, I've had clients that earn quite a lot of money, but then spend quite a lot of money.
• 25:32
  And it's not about how much you earn, it's about how much is left over after your compulsory outgoings.
• 25:40
  So I guess an example was somebody was earning like $370,000 a year.
• 25:45
  And then they also had financed a very fancy car, I think it was a Lane Land Rover.
• 25:50
  And they were telling me on the phone, oh, it's costing me too much, I'm going to downgrade to a Tesla.
• 25:56
  You know, the ones with the funny doors.
• 25:57
  Imagine that being your downgrade.
• 26:01
  And I was like, cool, how much debt is going to be on that then?
• 26:03
  And they said $100,000.
• 26:05
  And I was like, is there anything else?
• 26:06
  Like, oh, we've got another car loan and we've got these credit cards and a personalized.
• 26:09
  It turns out they had $220,000 worth of debt.
• 26:12
  No house, 10% deposit, high income.
• 26:15
  And I was just like, okay, like, like you don't have the only responsibility.
• 26:22
  People have mortgages that are less than that.
• 26:26
  And I just, and it comes back to like, I don't know why they got this debt out.
• 26:30
  They wanted to look cool because they had cool cars, whatever.
• 26:33
  But you have good income.
• 26:34
  You should be a bit more financially savvy with that.
• 26:37
  Yeah.
• 26:37
  So it's not about how much you earn, it's about how much is left over.
• 26:40
  So if we look at somebody else's situation, which is more common, they may be jointly earn like 150, 160, but they have low overheads, no debt, maybe a couple of after pays.
• 26:53
  They are more savvy with their money, they understand that budgeting is important.
• 26:58
  And then those people are more likely going to be approved for a mortgage and probably for a bigger mortgage than those other people because they actually have more leftover money to service the mortgage.
• 27:10
  Because imagine servicing $200,000 worth of car loan debt at 15% over a five year term versus $800,000 of mortgage debt over 30 years at 5%, it's probably exactly the same.
• 27:22
  So what would you rather?
• 27:23
  A house or a teaser that looks like it can fly?
• 27:27
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• 28:20
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• 28:24
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• 28:34
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• 28:37
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• 28:37
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• 28:41
  I'll also pop that link into the show notes for you.
• 28:44
  Right back to it.
• 28:46
  I think we should talk about, while you're talking about myths, is how much money you've made or lost on a property that you own.
• 28:55
  Ooh.
• 28:56
  You know, like people that I've got negative equity.
• 28:59
  I feel like I made a bad financial decision because my house values decreased.
• 29:03
  Like, it's nice that you look on Homes Co NZ or Realestate Co NZ and you see the value of the property.
• 29:08
  Or maybe it's not so nice if it's gone down, but you haven't sold it yet.
• 29:13
  So if it has gone down, you haven't lost anything from maybe a bruised ego.
• 29:18
  If you just hold onto it for a little bit longer, it will probably go back up in value.
• 29:23
  And the flip side of that is, oh, my house is now worth more than what I paid it for on this website that doesn't even know the condition of the house.
• 29:31
  So, yes, technically you could lend against it, but people have this metric of like, my net worth is worth so much more now because of this.
• 29:38
  And it's like, well, you haven't actually sold this property yet.
• 29:41
  So until you've sold it, that's not your money.
• 29:45
  Because they might not know that it's made out of plaster and is leaky.
• 29:48
  The paper value or the value they see on a computer screen shouldn't be taken too seriously.
• 29:54
  Exactly.
• 29:55
  I think there is this thing with.
• 29:57
  There are some situations where the paper value changing can be useful in terms of if your house goes up in value and then you can sort of get over the line from you've got a 10% deposit and now
• 30:07
  you might say you have 15% and maybe you can renegotiate, you know, your interest rate with the bank.
• 30:13
  That's pretty much the only time it really matters if you're not selling anytime soon.
• 30:18
  Otherwise you just sort of keep ticking along.
• 30:20
  Right.
• 30:21
  I mean, what do you.
• 30:22
  When you're talking to clients about that sort of thing and how they can make the most of their house, how much would you say keep an eye on those house values?
• 30:30
  Would it be much at all?
• 30:31
  From the low equity perspective, yes.
• 30:34
  But then at the same time, the bank has their own values, so you can look it up on homes or whatever, those websites, and that's not going to be the same as what the bank has.
• 30:42
  So again, taking it with a grain of salt.
• 30:45
  Then there's also like, yes, your house is like increased in value.
• 30:48
  I can get equity out to buy another house.
• 30:51
  And equity is a mystery to a lot of people.
• 30:56
  They think it's free money.
• 30:58
  The amount of people that, oh, but can't I just use equity for that?
• 31:01
  Yeah, you could, but that's actually getting a loan out against your property.
• 31:06
  So that will end up being debt and you need enough money to service that debt.
• 31:10
  And they're like, oh no, I'm pretty sure I can just get it out from the bank.
• 31:13
  They'll give it to me.
• 31:14
  Like you still need to pay it back with interest.
• 31:18
  So if you look at your house values gone up a million dollars, yes, you could technically borrow more against that asset, but it still then would debt that you have to use and pay back for other people.
• 31:28
  And that's a big thing I think I overlooked when I started making those videos is people don't know that much about this industry and equity came up a lot thinking it was free money.
• 31:41
  I'll just use equity to do this.
• 31:42
  Just use equity to do this.
• 31:43
  I'm like, still have to pay it back.
• 31:46
  You still have to get it approved.
• 31:48
  You still have to do a mortgage application to get it like out of the bank.
• 31:52
  So it's not as easy as people think it is or some people think it is.
• 31:57
  Yeah, 100%.
• 31:58
  Speaking of property values, I mean, as someone who is working in the industry right now, what do you make of the property market at the moment and sort of what's running hot, what's not?
• 32:08
  Do you see sort of winners and losers in the market at the moment?
• 32:12
  Winners, first time buyers.
• 32:14
  There was a stat that came out last week, it was like 28% of the market shares.
• 32:19
  Now first home buyers, which is at the highest it's ever been, which is good.
• 32:22
  Even though I would say overall the market is probably quite flat, sales are down.
• 32:26
  We almost looked like we were going to make a little bit of a recovery until the whole Iran war thing.
• 32:32
  I was like, these look like more people are calling me, more people are buying houses.
• 32:36
  Then all of a sudden I had people that said to me, I'm going to wait and see what happens overseas before I buy.
• 32:42
  And I think that was probably echoed with like 30 to 40% I would say, of people, which is quite a high percentage of people worrying about what's happening overseas.
• 32:53
  But yeah, generally in the market at the moment, I would say houses that are selling are still the ones in Auckland around the million dollar range that target first home buyers that have been renovated recently or are like
• 33:05
  pretty nice looking.
• 33:06
  So if you are thinking that that is that kind of property that is for you, which is a lot of people and you're thinking it's going to be passed in an auction.
• 33:14
  I had somebody miss out two auctions on the same day and it was like the only two houses that actually sold at auction were the ones that they wanted.
• 33:24
  But it was the perfect example of the sample size of this is a house that is for two well earning professionals, pretty much fully renovated over the shore and you don't have to do anything.
• 33:36
  Good location, around a million dollar.
• 33:38
  I think it ended up selling for like 1.3.
• 33:40
  But like that's the market that is always going to be good regardless of what's happening in the world.
• 33:46
  Because people still need houses and they still want a good house.
• 33:49
  On the flip side of that, if you think about things that aren't selling, AKA opportunities for someone, the rundown properties that need renovation, the old investment properties, but also like the townhouses, like we do have an oversupply of
• 34:04
  townhouses and if you've got one that you're trying to sell or you're buying in a block of like a hundred, that's where you can say I want a discount.
• 34:12
  And if you're trying to sell one of those, you probably need to be realistic with how long it is going to sell.
• 34:17
  I wouldn't say nobody wants them, I would just say that there's a lot of them.
• 34:21
  So people are going to buy the one that is cheapest if they're all pretty much the same.
• 34:26
  Yeah.
• 34:27
  Yeah, okay.
• 34:28
  That's really interesting.
• 34:29
  I especially love the bit on the first home buyers, um, being the ones who are still in the market.
• 34:34
  Cause I just feel like they're due a break to be honest.
• 34:37
  They've had a rough couple of years.
• 34:39
  Yeah.
• 34:39
  And from like my, my business point of view is when it was post Covid and people were going crazy falling over each other for houses, you know, people were putting in offers on places I'd never seen and if
• 34:53
  you're a first home buyer, like buying a house is scary regardless of when you're trying to buy.
• 34:59
  But back then I reckon there was probably a conversion rate of the people that I got approved to actually buying of only like 50, 60%.
• 35:08
  So 5 or 6 out of 10 actually bought a house and the others were just like this is too scary.
• 35:14
  I want to take time to like make a decision I want to put 10 days for finance.
• 35:19
  I want to, you know, they probably wanted to put like a due diligence clause in and take the time to understand the process.
• 35:27
  Back then you couldn't do that, you know, you just miss out.
• 35:30
  Now people can take the time to understand the process and that makes this market way better for a first time buyer because you can actually say, well, here's three houses I like.
• 35:41
  Maybe I'll try and buy this one.
• 35:42
  Oh, I didn't buy it.
• 35:43
  No, I'll try and buy this one.
• 35:44
  Didn't buy it.
• 35:45
  But like you set your own rules because it is your market, it's a buyer's market.
• 35:49
  It's not like the seller's just going to go to the highest bidder because there's probably not that many other bidders.
• 35:55
  And that is great because you've got the time and you've got the, you know, you can take a breath and actually think about things.
• 36:01
  And conversion rates for us now are probably 8 to 9 out of 10 that people that we get pre approvals for actually buy.
• 36:08
  Obviously I have a very small sample size of the overall market, but from that perspective, 100% first home buyers are buying and they've got the opportunity to take the time.
• 36:18
  And I think that suits that mentality of I've never done this before, I want to understand the process 100% and.
• 36:24
  I think being able to have the time to actually look into a house, get your builder support, figure it out, figure out what you want to do in terms of your financial approach.
• 36:33
  It's, it's so good in terms of taking some of the heat out and you're not making those panicky decisions.
• 36:38
  I just think emotions and money should never ever mix.
• 36:41
  They do with housing, unfortunately, especially when it's your own home.
• 36:45
  So if you can take out some of that sort of panic, the fomo, that, oh God, you got to move fast or someone's going to snake it.
• 36:51
  So helpful, so useful for making a smart decision that actually leads perfectly well into one of the other myths that I wanted to run by you because I see this in the comments all the time, that people, young
• 37:03
  people especially, are just straight up priced out of the housing market.
• 37:06
  What do you make of that particularly being Auckland based?
• 37:09
  I don't think they are.
• 37:10
  I think some people maybe just need to be a bit more realistic and that might be like a hard pill to swallow.
• 37:18
  But like your first home isn't supposed to be your forever home.
• 37:21
  Like there's houses still in Auckland.
• 37:23
  My clients are buying for 600, 700,000, most people can afford those.
• 37:28
  It's just whether or not people want to live in them or want to live in those areas.
• 37:32
  And if you don't, then buy a house that you rent out, don't use your kiwisaver and just get on the market that way and then go rent somewhere that you want to.
• 37:40
  So I think it comes down to what is realistic.
• 37:45
  Of course you want a pool, of course you want a backyard.
• 37:48
  Of course you want like realistically everybody that has the average income and at least 10% deposit should be outta buy something which is whether or not they want to buy that thing that is in their price range.
• 38:01
  Because yeah, for a lot of people it's townhouses.
• 38:03
  And I get why you wouldn't want to buy a townhouse, but you can't say that you're priced out of the market.
• 38:09
  You're probably just priced out of the market of what you thought you were gonna get.
• 38:13
  Because a million dollar house isn't what it used to be.
• 38:16
  You know, like when I was growing up, a million dollar house had a pool and a tennis court.
• 38:21
  Now you'll be lucky if it has a garage.
• 38:23
  Oh God, that's so grimly true.
• 38:26
  Yeah, yeah.
• 38:27
  Or Queenstown shout out to our south island pals.
• 38:32
  No, that's, that's so true.
• 38:34
  What do you think in terms of the idea of the rent vesting thing?
• 38:38
  The idea of buying somewhere else that's more reasonable?
• 38:41
  I guess you'd have to be sort of planning that out a little longer term because then you're not using your kiwi saver, you're going to have to have savings or investments elsewhere.
• 38:49
  Right?
• 38:49
  Yeah.
• 38:50
  It probably suits the people that like are self employed that don't get the kiwisaver stuff from their employer.
• 38:55
  I think you just have to weigh it up, you know, and there are probably people that are thinking, well maybe I buy it as a home and live in it for the first year or so, whatever the rules
• 39:04
  are for using Kiwisaver and then turn it into an investment property.
• 39:07
  So like, but you'd want to check how long you need to live in it.
• 39:10
  Maybe speak to someone like yourself and set a strategy even if you're not buying right now.
• 39:14
  Yeah.
• 39:15
  And like talk to kiwisaver providers if you think you are going to use Kiwisaver and want to know what the rules are.
• 39:21
  All right, I'm going to cheat on our next little social media myth bus because I didn't actually see this video, but I saw you get Mad at it.
• 39:28
  So it was, someone had said that if you pay a dollar a day on your mortgage then you are going to save all of this interest.
• 39:37
  Is that right?
• 39:38
  His concept was that if you pay a dollar a day it resets the bank's computers or some bs and then you don't do it.
• 39:46
  And then positioning himself as like an engineer for like the, the like he built the bank systems kind of thing.
• 39:52
  And then there was all these other people that are like, I've paid a dollar a day and I'm still getting charged interest, it doesn't work.
• 39:58
  And I basically just said do people really think that if there was a way to not pay interest on a mortgage that the bank wouldn't have figured it out pretty quickly and close that loophole.
• 40:08
  This is the thing.
• 40:09
  Even if these things are true, like if it's, if it's being sold as a loophole or a way you can get around things by the time you've seen the social media video, probably a bad idea to get into
• 40:19
  it.
• 40:19
  Even if it does, does work because there was this thing that happened and I'm going to be careful on the details here.
• 40:25
  So forgive me anyone who doesn't know the full details but you know, it literally turned into a fraud case.
• 40:30
  So I don't want to give people the tools to commit fraud.
• 40:33
  But it was this, this TikTok that went absolutely wild in Australia I think two years ago that basically gave people a way to claim back tax in a way that was fraudulent and it was a real loophole and
• 40:48
  a lot of people were doing it and not getting caught.
• 40:50
  But then this TikTok went wild.
• 40:51
  A whole bunch of people did it.
• 40:54
  Tax agents in Australia also have TikTok, saw the video and then saw all of these people submitting it and you're using your real name and your real tax like number to do this.
• 41:07
  And it was a multibillion dollar fraud case where all of these people got then hunted down by the Australian tax office.
• 41:15
  Didn't work out well.
• 41:16
  So you know, just be careful.
• 41:18
  Well it's kind of the same as like if you accidentally get transferred $200,000 by the bank.
• 41:24
  Like you know that that's not your money.
• 41:26
  So just say hey, I think this is a mistake.
• 41:28
  Rather than doing what we've probably seen in the news where people just go and spend it and then technically I think they get prosecuted as well.
• 41:35
  Right.
• 41:35
  Because it's not their money to spend.
• 41:37
  One of the first court cases I worked on when I was a little baby journo was the Westpac millionaires.
• 41:41
  Do you remember that?
• 41:43
  Where I think this is going to be fuzzy now because I'm older than I like to admit they got transferred $2 million accidentally or it was a $2 million overdraft that they were accidentally given something like that and
• 41:53
  they tried to run away to China, didn't work, came back very much prosecuted.
• 41:59
  So yeah, just yeah, don't do that.
• 42:01
  Very easy to track you down.
• 42:03
  Well, in terms of like we were talking there about the paying a dollar a day on the mortgage, what's the reality there in terms of repayments, how fast you do it versus how not.
• 42:13
  Because I know there's a whole bunch of stuff around paying monthly, paying fortnightly, paying daily, whatever.
• 42:19
  Any truth to those?
• 42:21
  The general idea that people still think is you have a 30 year mortgage, you have the options at most banks to do weekly, fortnightly or monthly as repayment options.
• 42:32
  Because there's technically like if you did fortnightly, there's more repayments versus monthly.
• 42:38
  They think that therefore their 30 year mortgage is going to be shorter and they're going to save interest, which is true in Australia, not in New Zealand.
• 42:51
  And the reason for this is because the bank just says, well you've set it up on a 30 year mortgage, it's still going to take you 30 years to pay it off.
• 43:00
  So they just change the payment amount.
• 43:02
  If you did actually figure out what the fortnightly payment was and you did make extra payments, then yeah, it would be gone.
• 43:09
  And that is the magic is because you're making the extra payment.
• 43:13
  So if you're on monthly or fortnightly or weekly, it's not really going to make that much of a difference.
• 43:18
  It's still going to be paid off 30 years.
• 43:20
  If you're paying the minimum, the goal should be to pay extra.
• 43:24
  And if then you're comparing $100 a week versus $200 a fortnight versus $430 a month, which is all the same amount.
• 43:34
  It would be more beneficial to pay it weekly $100 a week because it's calculated and reducing more often.
• 43:42
  And that would save a little bit more interest compared to if you did the monthly at 4:30.
• 43:47
  But the key thing is you're paying extra and the more you can pay extra, the more frequently the more you're going to save and reduce the overall mortgage term.
• 43:58
  That's the key as well for the the making your mortgage repayments shorter.
• 44:03
  For making your mortgage term shorter.
• 44:05
  In New Zealand there's so many different tactics.
• 44:07
  I've talked about heaps of different ones in various different episodes of this podcast.
• 44:12
  So many of them just come down to making an extra repayment.
• 44:16
  Now, there's different tactics for doing that.
• 44:17
  You can do your revolving credit, your offsets, you can pay more frequently, or like, as long as it's actually still more, but it will come down to an extra repayment in the way that works for your lifestyle.
• 44:29
  All of those little tactics in New Zealand, the only difference between them is which one works for your money mindset, which one works for your.
• 44:36
  Your mentality, your budget, what keeps you on track.
• 44:39
  And after that, it's just an extra repayment, which is super powerful.
• 44:43
  Don't get me wrong, you will save so much money and interest, it's super worth doing.
• 44:47
  I do it.
• 44:48
  I personally am a revolving mortgage fan.
• 44:51
  Not everyone is.
• 44:53
  Whatever way that works, it's just getting in those extra repayments, right?
• 44:57
  Yeah.
• 44:57
  And I think a common question along that train of thinking is, is it better to pay more frequently, increase my repayments, or is it better to, like, save all that money up and then pay a lump sum?
• 45:09
  So if we workshop how that would look, you decide to save a hundred dollars per week for a whole year, at the end of the year, you have 5200 and you make a lump sum, Is that going to
• 45:23
  be better than if you just paid $100 off your, you know, every single week for, like, you increased your repayments?
• 45:30
  The answer to that question is because again, they calculate interest daily.
• 45:34
  If you paid $100 weekly, that would save you more interest.
• 45:38
  But the difference, it's not that big.
• 45:41
  You know, we're talking, like, finer details.
• 45:44
  So if you had the option of paying $120 per week versus $100 per week, that's going to be a bigger difference.
• 45:51
  So it's again, like, you're saying extra payments and more amount, that makes the biggest difference.
• 45:58
  And I wouldn't, like, get someone to, like, fully say, all the money that I ever get every single week should go on my mortgage.
• 46:06
  Because you don't want to do that, because then you're not going to have any money left over.
• 46:09
  And it's about budgeting and understanding.
• 46:11
  And with all of my clients, when we do the loan structure meeting, which is the meeting that happens just before settlement, we talk about what their repayments are going to be.
• 46:18
  And I show them a little, like, calculators, like, if you paid this amount, here's how much faster your mortgage would be paid off.
• 46:26
  And they get really excited.
• 46:27
  They're like, whoa, it's going to be gone in 12 years.
• 46:30
  And the example that I usually show them is the bank's allowances that you can pay extra during fixed terms.
• 46:37
  So a lot of banks, the ones that are good for paying during fixed terms, will give you a 5% allowance.
• 46:43
  So 5% of the loan amount per year can be paid as extra during fixed terms without any penalties.
• 46:51
  For the average mortgage, that saves pretty much half of it gone.
• 46:56
  But then I kind of say to them, hold your horses, you've not even got this mortgage yet.
• 47:02
  Just don't pay anything extra for the first three to six months and understand what it's like to actually live in this house, pay the mortgage, pay your council rates, pay insurance, have maintenance, and then make an informed decision
• 47:15
  of how much extra you want to pay.
• 47:16
  Because you probably still want to live your life and you don't know what that looks like until you've had the house and paid the mortgage.
• 47:22
  Because people can do their numbers on their spreadsheets and they can do the numbers however they want, but living the life and actually understanding how much money you've got left over, that's going to be the best indicator of
• 47:34
  how much you should actually increase your repayments by,.
• 47:36
  Oh my God, 100%.
• 47:38
  Another thing I see a lot of people panicking about is the idea of credit scores.
• 47:41
  Are they calculated the same way in New Zealand?
• 47:43
  Do they even really matter?
• 47:45
  Hit me with your thoughts on credit scores and how much we should be stressing out.
• 47:49
  They do matter, but not like overseas.
• 47:53
  Like the idea of, should I get a credit card to show New Zealand that I've got good credit?
• 47:58
  The idea is you just don't want bad credit.
• 48:01
  In New Zealand, your score is judged out of a thousand.
• 48:03
  You can look it up on most websites for free.
• 48:06
  Anything over 600 is probably what you want to aim for if you're going to get a mortgage.
• 48:10
  The things that lower it is obviously taking out debt and not paying things off repeatedly.
• 48:17
  Like if you just miss a credit card payment or if you get the little reminder in the mail for your speeding ticket or your parking ticket that you haven't paid.
• 48:25
  Don't worry, that doesn't really affect it.
• 48:27
  It's more like, oh, I have this car loan and I haven't paid it for six months, that's going to massively decrease it.
• 48:36
  And then when we apply for a mortgage, the bank will look up your credit score and they'll say, credit score's low.
• 48:42
  But they don't really care that much about, like, the number they care about why it's low.
• 48:48
  Yeah, if they're going to give you money, they want history of you being able to pay back money.
• 48:54
  And if you've gotten smaller amounts in the past and you haven't paid it back, makes them pretty nervous.
• 48:59
  Yeah, it's very different here in terms of like, I think it's Dave Ramsey has the very famous line of the credit score over there being like, I love debt score.
• 49:08
  And that.
• 49:09
  Yeah, you might need to have a credit card to show I get out this much money and then I pay it back.
• 49:15
  That that might be good financial advice in America here.
• 49:19
  Credit cards are designed to get you to spend more money.
• 49:23
  So that sort of history with a credit card, if it's good, doesn't really matter.
• 49:28
  It will probably encourage you to spend more.
• 49:29
  It could get you into that bad spending trap in general.
• 49:33
  And like you say, really all they're looking for is have you missed payments.
• 49:37
  So take yourself out of temptation's way.
• 49:41
  Don't have anything where you could be missing payments.
• 49:43
  That's going to be better.
• 49:44
  Right.
• 49:45
  The credit card thing is quite an interesting frame of mind because whenever I talk to people for the initial phone call, I'll be like, how much do you guys earn?
• 49:53
  What's your deposit?
• 49:53
  What do you want to spend?
• 49:54
  All those kind of questions.
• 49:56
  And then I ask them about their debt.
• 49:57
  I'm like, do you have any debt?
• 49:59
  And they'll say, no.
• 50:00
  And then I'll say, do you have any, Like, I asked them again, do you have any debt?
• 50:04
  For example, credit cards?
• 50:06
  And like, oh, yeah, we got some credit cards.
• 50:08
  So they don't see credit cards.
• 50:10
  New Zealanders don't process or don't think that, you know, a credit card is debt.
• 50:15
  They don't think that afterpay is debt.
• 50:17
  But whenever you owe money to someone, that is debt.
• 50:21
  So then it goes, oh, yeah, We've got a $10,000 limit, but we pay it off every single month.
• 50:25
  And I'm like, okay, well, the bank is actually going to take the $10,000, the limit into your application.
• 50:31
  And if you want to max out your borrowing capacity, that will need to be closed.
• 50:35
  Everybody's got a different financial education, and when it comes to getting a mortgage, I see all kinds of different financial information education.
• 50:47
  But at the end of the day, that doesn't matter as long as you tick the bank's boxes.
• 50:51
  I learned a lot doing what I do and looking at people's bank statements.
• 50:55
  And it's a little bit depressing to see how much people have in terms of Debt, like how much debt we've got in New Zealand, They've got more debt than they do emergency funds.
• 51:04
  That's upsetting.
• 51:05
  It's very upsetting.
• 51:06
  And like, people be like, oh, the numbers work.
• 51:08
  I want to get a house.
• 51:09
  And I'm like, do you guys have savings?
• 51:11
  And they're like, no.
• 51:12
  I'm like, please, like, even if you're not going to buy a house, your goal should be to get $5,000 emergency fund.
• 51:21
  But why do I need that?
• 51:23
  Like, what do you mean, why you need it for emergencies?
• 51:25
  It's in the name.
• 51:26
  And I even did a video on it and turned it into an ad purely because I wanted to, like, educate more people and say, before you come to me for a mortgage, have $5,000 to show the bank that
• 51:39
  you can save to have it there as a buffer if there's an emergency.
• 51:43
  Because if there is, you're just going to get more debt and make things worse.
• 51:46
  And you obviously need to like pay a builder to do building reports.
• 51:49
  You need a valuation.
• 51:50
  If you're buying less than 20% deposit, you need to pay a lawyer.
• 51:53
  All that stuff costs money.
• 51:55
  How are you going to buy a house if you don't have some level of savings?
• 51:59
  Because you can't use KiwiSaver for that.
• 52:00
  I guess for those people that are listening, you're thinking, well, do I need an emergency fund if I invest in shares or if I increase my KiwiSaver contributions?
• 52:08
  And I guess the answer to that is technically no, because you are doing more than you need to.
• 52:13
  But like your Kiwisaver, some people put 10% contributions into that.
• 52:17
  Can't get that out for emergencies unless you're like, properly hardship, you still want to have something that you can access.
• 52:24
  If your car breaks down, if you have to fly overseas for an emergency,.
• 52:28
  Okay, then if there's like the biggest mortgage mistake you see people make, what, what would that be?
• 52:36
  What's an easy fix for it?
• 52:38
  The biggest mortgage mistake is probably just not understanding how mortgages actually work.
• 52:43
  You know, it baffles me a lot when people who have mortgages don't understand a mortgage.
• 52:50
  Like you've now got a mortgage and you still don't understand how it works.
• 52:54
  And I think that common theme comes across in my videos where I say, you can pay extra and you'll save heaps of money, like what we were talking about.
• 53:03
  And then people will kind of like, oh, yeah, but like, banks won't let you do it during fixed terms.
• 53:07
  And like every bank lets you do extra Payments during fixed terms.
• 53:11
  The allowances are slightly different.
• 53:14
  Understanding which bank has the best allowances might position which bank you go to for your mortgage.
• 53:19
  But like, every bank will let you make extra payments and that is where you make the biggest dent in your mortgage.
• 53:28
  When I do those loan structure meetings, I'm like, one of the questions I say is, have you guys had any discussion about how you want to structure your mortgage before we go into what I think you should do?
• 53:37
  And they'll be like, oh, yeah, I want to do someone floating and I want to do someone fixed.
• 53:40
  And I'm like, floating is more expensive.
• 53:42
  Why?
• 53:43
  Why do you want to do floating?
• 53:45
  Oh, because I want to make extra payments.
• 53:46
  And I'm like, you can make extra payments on fixed terms.
• 53:49
  And like, really?
• 53:50
  And I'm like, yeah, oh, well then I don't want floating then, because that's like a whole percent extra.
• 53:55
  You can play around with your app and literally click on the mortgage thing and it will say, make extra payments, lump sum.
• 54:01
  Like, click on it and see what happens.
• 54:03
  Like, I'm very big on, like, just experiment and see what you can do.
• 54:07
  Like, you're not going to accidentally pay off your full mortgage by accident or something like that.
• 54:11
  So learn as you go and you can just be open to learning and educate yourself on what you're doing.
• 54:17
  And there's plenty of people that do that when it comes to mortgages because obviously it's a massive decision.
• 54:22
  There's plenty of people that probably don't do it enough.
• 54:25
  And then I'd say there's people that probably overanalyze situations and just never buy a house.
• 54:29
  Which is kind of sad because there's people that earn good money.
• 54:32
  They can buy a house.
• 54:32
  They probably could have bought a house years ago, but they're like, I want the perfect house that doesn't exist.
• 54:38
  It's always a compromise at some point.
• 54:40
  Yeah, yeah, all right.
• 54:41
  Well, if people are wanting to learn as they go, you have fantastic accounts where you put out a lot of this information for free.
• 54:47
  And as we've talked about, you actually working in the industry, so you're getting real time updates on what's happening, what's not, even as things change.
• 54:54
  So where can people find you and get more of your great tips and tricks?
• 54:57
  The MortgageMan Co NZ I actually just created a spreadsheet for first home buyers that people can download for free and they just put their numbers in.
• 55:04
  It will basically say, here's how long it's going to take for you to save your deposit based on your expenses and your income, and it will tell them how much their ongoing costs are going to be once they
• 55:15
  have a mortgage and what the upfront costs are.
• 55:16
  So it's a really helpful tool.
• 55:18
  So I'm big on, like, I don't really want to say, come and call me and be my client from day one.
• 55:24
  Like, learn the process, understand things so that when you do come to me, like, you already know that you can get a mortgage.
• 55:31
  You kind of understand the process because there is so much to learn.
• 55:36
  And that's why that spreadsheet exists.
• 55:37
  That's why I do my videos on TikTok Instagram.
• 55:40
  That's why I even built my first Homebrew Academy, which is also free.
• 55:43
  Just like when you come to me, you kind of already know like the first 10 to 15%, which is a great starting stone.
• 55:52
  Thank you so much, Aaron.
• 55:53
  Really appreciate you coming in.
• 55:54
  Now, if this episode was helpful to you, send it to a friend.
• 55:57
  We can all level up together.
• 55:58
  Until next time, have a great day.
• 56:01
  This podcast can only give you general information about how things work in most situations.
• 56:06
  It's not individual financial advice.
• 56:09
  If you're after that, a financial advisor is always the best bet.