November 2010 Podcast Episode 01 – Steve Fitzpatrick from Your Building Broker and Max from Aussie
Steve Fitzpatrick: Hello, everyone. This is Steve Fitzpatrick, the Managing Director of Your Building Broker and today I’m with Max from Aussie Home Loans. We’re going to be talking a little bit about Finance. So hi, Max. Welcome aboard.
Max Reinhardt: Hi, Steve. How’re you doing?
Steve Fitzpatrick: Yeah, I’m good. Thanks. So Max, you’re with Aussie Home Loans. I’m just wondering if you could tell our listeners how long you’ve been with Aussie.
Max Reinhardt: Okay, well I’ve been with Aussie, essentially, for… It’ll be 6 years in December. My employer has actually changed a few times. It was originally GE, then Wizard, and then Aussie through acquisitions.
Steve Fitzpatrick: Right.
Max Reinhardt: Essentially, I’ve been with the 1 employer for 6 years or just coming up to 6 years.
Steve Fitzpatrick: Okay. So you’re pretty full bottle these days on finance?
Max Reinhardt: Yeah, yeah. And I did Economics at uni. Finance is definitely my game.
Steve Fitzpatrick: So you did Economics and then you chose to become a mortgage broker?
Max Reinhardt: Yeah.
Steve Fitzpatrick: That’s an interesting career decision. What made you get into mortgage brokering?
Max Reinhardt: I sort of just fell into it. When…
Steve Fitzpatrick: Like most of us. When we’re straight out of uni, we’d fall into our professions, I think.
Max Reinhardt: Exactly. It was the 1st real job I was applying for when I came over to Australia. And I got off with the job, took it, and haven’t really looked back.
Steve Fitzpatrick: So, Max, we wanted to talk a little bit today about different finance options and things that people can do. What would be some of the most common things you get people asking for when they come in and look in for a home loan?
Max Reinhardt: They just want to know, you know, how much they can borrow normally, you know, how the 1st homeowners grant works, whether they should be buying established or, you know, looking at building. Generally speaking, people just want a bit of guidance and that’s normally where we fit in.
Steve Fitzpatrick: Okay. And Aussie being a mortgage broker, what’s the advantages of going to a mortgage broker as opposed to going directly to a bank?
Max Reinhardt: Well, with Aussie, we’re slightly different because we are a lender, as well. And that’s originally how we came about about 18 years ago. We did start out as a lender, changing the banks. And slowly but surely, we managed to force their rates down. It got to a point where we couldn’t really force them down any further so we decided to join them in 1 sort of sense and then start brokering to them. Really, the main advantage of using a broker rather than going direct to the lender is saving you the time of shopping around.
Steve Fitzpatrick: Okay, and then you go through… You have like different options that are valuable to them as far as finance and costs and loan establishment fees, those sorts of things?
Max Reinhardt: Exactly. And for example, let’s say that the cheapest loan is with National Australia Bank. If you were, say, a Commonwealth customer and you walk into Commonwealth, they’re just gonna tell you what they’ve got on offer. They’re not gonna say, “Oh, hang about, go next door. National is charging better than us.”
Steve Fitzpatrick: Yeah.
Max Reinhardt: So there’s lots of little intricacies that people don’t really realize. Things like, you know, the difference in cost and mortgage insurance between different lenders, the different fees associated with the loans, and so forth. And whether, also, what sort of policies they have and how that would fit with the customer’s situation. Yeah, it’s not as simple as just finding the cheapest loan each time.
Steve Fitzpatrick: Yeah, sure. 1 thing, though, that you raised just then was when people were trying to compare loans. You have a software suite that you use. Is that right?
Max Reinhardt: Yeah, that’s right. We got something called Mortgage Explorer. And Aussie is very proud of Mortgage Explorer. And we’ve actually invested a lot of money to improve that. They’re looking at releasing something out to us early next year which will be even better. At the moment, it is pretty good and we can compare whether this loan is… You know, which loan is gonna be the cheapest for your particular circumstance. We plug in, you know, how much you’re borrowing, how much your security is worth, and what sort of features you want from the loan. And it would narrow it down and order all of the loans that we have from our panel of lenders from 1 to… Probably 1, 2, 3… A hundred, if you opened up all the parameters.
Steve Fitzpatrick: Oh, okay.
Max Reinhardt: Normally, we show you and we compare 3 on a page. And yeah, generally speaking, I won’t go past the 2nd or 3rd page so…
Steve Fitzpatrick: So typically, someone would come and sit down with you and say, “Right, this is sort of my financial position. This is what I’m trying to achieve.” Whether they’re buying a new house or building or doing something along those lines… And then you’ll narrow their choice down, remove a lot of the surplus from the excess out of the way and then really narrow it down to some good choices as to who they can borrow with.
Max Reinhardt: Exactly. We go a little bit further. We do a Full Needs Analysis with every customer. So we try and, you know, tailor-make the solution to their needs.
Steve Fitzpatrick: Okay, what would be some of the different kind of needs that people may be asking for?
Max Reinhardt: It depends on the customer, yeah. For a 1st home-buyer, for example, with, let’s say, not the biggest budget… If they’re gonna be on fairly tight sort of constraints, they might just want a fairly basic starter loan with a sort of, you know, set and forget direct debit and they wouldn’t need any other features.
Steve Fitzpatrick: Yeah, okay.
Max Reinhardt: They might want the free redraw on that sort of stuff. And then, you know, you’ve got the more complex situation, every bit of extra money that can be used to work in your favor, you might want something a bit more sophisticated…
Steve Fitzpatrick: Yeah.
Max Reinhardt: For Off-set Accounts and so on.
Steve Fitzpatrick: The Off-set Accounts and the Redraw Facilities are something that I find useful for myself because I also used to… I haven’t recently, but I used to dabble a lot in the share market as well. And so that has given me the flexibility to be able to invest in the stock market and then withdraw and put money back in when I would sell. And then the whole time, having that offset against my loan whenever the funds were in the account. What I did find was after a period of time, that I ended up seeing that the stock market just wasn’t moving enough and in essence, I was actually better off having that money sitting in the off-set account with the risk that goes on with share market trading, the buy and sell prices that come out of it, as well…
Max Reinhardt: Yeah.
Steve Fitzpatrick: And all the costs associated there…
Max Reinhardt: The commissions, etcetera…
Steve Fitzpatrick: Yeah, that’s right.
Max Reinhardt: I mean, that’s how I use my loan, as well. And look, most people, if you went into a bank, they’d be sold a line and credit and generally speaking, you pay more for a line and credit. And like you said, you know, if you’ve got the Off-set Account or using the redraw facility, that can work much more in your favor. That’s exactly what I do on a day to day basis.
Steve Fitzpatrick: I know when they 1st came in with the Off-set Accounts, a number of my friends and other people that I was working with at the time were really nervous that… They were thinking, if they had the funds there, they wouldn’t be disciplined enough to leave it alone. Do you find that people still get into that trap or are we getting better with their money and able to leave that and continue to build up the Off-set Accounts so that it still gets the advantage of paying off the mortgage but it has funds available if we ever need it?
Max Reinhardt: Yeah, I have found that a lot of customers do fall in that very same trap with the off-set account. And for those people that aren’t very good at budgeting, the Redraw Facility tends to be something slightly better because they seem to treat it, I think psychologically, slightly differently.
Steve Fitzpatrick: Right.
Max Reinhardt: If it’s in an Off-set Account, it’s like, “Oh, that’s my money. I’m gonna use that. Take it in and out.”
Steve Fitzpatrick: Go on holidays, all the good stuff…
Max Reinhardt: Exactly. If it’s just, you know, you have available redraw… You know, all you’re doing is you’re seeing money that you owe, the balance coming down. So psychologically, I guess, you know, you don’t feel that it is your money. That normally works better for someone who isn’t the best budgeter. But yeah, it will depend on the individual, really.
Steve Fitzpatrick: Yeah, I have to say that I really like the fact that, with my Off-set Account, I could continually see that balance growing and it was kind of every month, I would sort of set goals. I was paid monthly so every month, I’d look at that and say, “Right, well it’s increasing. It’s increasing.” So I was knowing that I was living within my means and still getting the benefit of reducing my mortgage costs.
Max Reinhardt: Yeah, definitely. And look, if you’re disciplined and you’re that kind of person that you get enjoyment out of seeing your balance grow, then yeah, that’s gonna work perfectly for you. But for… I guess the average person doesn’t really do that. And you normally know, from what their savings situation is at the particular time when they come and see you, as to whether they are a disciplined saver or not and whether something like an Off-set Account would be appropriate. Similarly, if you don’t have the Off-set Account, just seeing that balance come down probably has the same sort of, you know, warm feeling inside you as the off-set going up.
Steve Fitzpatrick: Yep.
Max Reinhardt: But yeah, each to their own, I suppose. We’ve got, obviously, 16 different lenders that we can use to cater for that individual need.
Steve Fitzpatrick: Yeah, okay. As far as timeframes go, what should clients think if they go into a lender, like yourself, to set up a loan? What sort of timeframe can they expect to receive, sort of like an Unconditional Approval going forward?
Max Reinhardt: With an Unconditional Approval, it will depend, obviously, how far they’ve got with their construction phase. So if they haven’t signed up their building contract…
Steve Fitzpatrick: Yes, that’s right from the beginning and they’re just getting started and they want to get it all put in place?
Max Reinhardt: Okay, you probably have to fill in some of the blanks here but I could get it pre-approved subject or conditionally approved subject to their building contracts and etcetera within a day or 2.
Steve Fitzpatrick: Right, so most people could walk in to your branch and say, “Listen, this is what I’m looking at doing. I’m gonna need about X amount of Dollars to build this place.”
Max Reinhardt: Let’s say, for example, they’re conditionally approved. They come back to me with their signed up building contract. In my experience, you know, you’re normally gonna take at least a month or so before you come back with those building contracts. But let’s just say that the next day, that the next day they were able to obtain a building contract and then came back into my office. It would depend on what type of valuation, if any, was needed. But in the best case scenario, I’ve had applications submitted on a Thursday night, after hours, formally approved by 1 PM the next day.
Steve Fitzpatrick: Oh, okay.
Max Reinhardt: So in that scenario, obviously they were happy with their equity position. You know, they had a 20% deposit.
Steve Fitzpatrick: Yeah.
Max Reinhardt: Didn’t need to do a valuation, we’ve pre-approved the load previously. So, yeah, by 1 PM the next day, it was all approved.
Steve Fitzpatrick: Oh, okay. So Max, just want to talk to you a little bit about Bridging Loans. If someone’s looking to build a new house and they’re often living in their current home, they may put their current home on the market but it may not have sold before the new house starts building. So they’ll often look for a Bridging Loan so that they can pay for their new home being built while their current home is still on the market. Is that still a common occurrence and is there any issues with Bridging Loans at the moment with banks?
Max Reinhardt: Yeah, it definitely is still a common occurrence. It will depend on what your particular circumstances are, what you want to do. I’ve got 1 right now where they were tossing up whether to sell before and then start building. Yeah, so they have a little bit less debt going into the construction. But in their actual position, you know, it turned out that renting was more expensive than what they’re paying on their current mortgage. They only owe about… I think it’s 243,000 at the moment. So they’re in a pretty good position. And yeah, they’ve decided that they’re better off keeping that house and staying there until the other house is built entirely. Now, depending on the situation, there’d be a few different options. One would be a true Bridging Loan. Generally speaking, that means you have to have sold your house within 12 months. Look, with the way construction is going now, most houses are built within about a 6 month period. That’s not a problem. You know, when properties were taking 12 months plus, it just wasn’t practical. And you know, you’re only going back 2 or 3 years when that was the scenario.
Steve Fitzpatrick: Even at the moment, most of the 2-storeys that I’m building or have clients who are building through me, they’re still taking sort of 9 to 11 months, most of them. That’s only really once we start getting into the luxury market or if we’re going 3 storeys and above, they’d have taken sort of 15-18 months at the maximum.
Max Reinhardt: Okay.
Steve Fitzpatrick: So we’re pretty lucky at the moment as far as the building timeframes go. It looks like that’s gonna remain fairly constant as a variable which is good news for anyone thinking about building. None of the same drawn out problems that we had during the boom period.
Max Reinhardt: Well, I think from what you’re saying there, you probably wouldn’t be that happy with a bridging-type loan because essentially, you’re gonna get to a point where… Alright, the house is pretty much complete but now I’ve got to sell this within a month or so or 3 months, at best.
Steve Fitzpatrick: Yeah.
Max Reinhardt: Generally speaking, yeah, you are gonna pay a bit more for a Bridging Loan, as well. You can normally still qualify for a standard loan which might give you a bit more time to decide what you want to do.
Steve Fitzpatrick: The customer that I’m looking at, at the moment, he’s not entirely sure, you know, whether he will definitely sell the property or not. But they’re looking at building a new house and still living in the 1 that they’re living in now until it’s built with the option to then either rent out the 1 that they are living in right now…
Max Reinhardt: Right, as an investment…
Steve Fitzpatrick: As an investment property, or selling it at their leisure rather than having to work within the bank’s constraints. They’ve got a bit more freedom.
Max Reinhardt: Yeah, as long as they got equity there and of course, you know, that they can afford to make their payments on both properties.
Steve Fitzpatrick: Yeah.
Max Reinhardt: Obviously, with construction, you will only pay the interest on what’s outstanding as you go through the different stages. They’d normally split up into 5 stages but as you get towards that very last stage, things can get a bit tight.
Steve Fitzpatrick: Yeah.
Max Reinhardt: And this is where you might choose whether to capitalize the interest in. If, of course, you’ve got you in that position, you might want to just pay the interest only in the short term.
Steve Fitzpatrick: I wonder if you could explain this to the listeners, have a little bit more about what that actually means when you’re capitalizing interest.
Max Reinhardt: Okay, let’s say we’re looking at a customer where they’re owing about 380,000 which would probably be, you know, a fairly normal scenario. And they’re looking at building, let’s just say a fairly cheap property as their 1st investment property, let’s say 220,000. So…
Steve Fitzpatrick: Can you still get investment properties in Perth for 220,000?
Max Reinhardt: I’m just talking the construction cost. So…
Steve Fitzpatrick: Okay.
Max Reinhardt: Yeah, I’ve been making the assumption that they’re already owning the land or maybe they’re subdividing.
Steve Fitzpatrick: I was gonna say ‘cos maybe I should come to you for my next investment property if you could get something up at 220. But that’s… We’re getting a little bit off topic here.
Max Reinhardt: I’ve got a customer that’s buying 1 for 226 at the moment, actually.
Steve Fitzpatrick: Oh, really?
Max Reinhardt: Yeah.
Steve Fitzpatrick: Right, maybe we do have to talk later.
Max Reinhardt: But just going back to that scenario, this is 1 way, they actually are subdividing. Again, there’s a customer I saw just before I came here. That’s why I know the numbers fresh in my head.
Steve Fitzpatrick: Yeah.
Max Reinhardt: I remember we looked at the option of capitalizing in the interest. We were looking at a rate of just under 6.5% on this one. So on a $600,000 loan for a year, we’re talking almost $40,000 in interest.
Steve Fitzpatrick: Right.
Max Reinhardt: Now, 1 option obviously would be to capitalize that interest in which basically means after a year, you owe 640,000 rather than 600,000.
Steve Fitzpatrick: Right, but it takes the pressure of you because you don’t have to come up with the 40 grand cash…
Max Reinhardt: Exactly.
Steve Fitzpatrick: While the place is getting built and you’re getting your drawdowns from the builder.
Max Reinhardt: Yep, so if you’re on a tight budget, then that would be a huge advantage. You’re not having to actually pay the interest. Probably, if you can afford to pay something, you still would want to pay something…
Steve Fitzpatrick: Yeah.
Max Reinhardt: So you don’t end up with this, you know, huge loan at the end of it.
Steve Fitzpatrick: Yeah, sure.
Max Reinhardt: Then maybe try and find a happy median. You know, “Let’s pay half of that interest whilst it’s being done.” So at least, your loan’s then only 620 versus 640.
Steve Fitzpatrick: Yeah, sure. ‘Cos I know when I built this place and I was paying… I sold my own house and I built this place while I was renting. Actually, we managed to rent directly opposite where we were building. And I think I looked at the interest that I’d paid over the course of the building period from the time we settled on the block through to the time we actually moved in. It was about 7 and a half thousand Dollars. And so if you’re paying rent as well as having to find an extra 7 and a half grand, you know, it can become quite tight especially in… This is the 1 thing that I do find in building. Once we reach lock-up where the house is pretty well.. You know, the shell’s been built, the roofs on, the window go in, and then you just doing the fitting on the internal; that’s when a lot of the drawdown from the loans have occurred. And that’s where clients are feeling the most pressure because they’re paying almost the full repayments on their home because a lot of the drawdown has happened. And in the meantime, they’re still paying rent quite often.
Max Reinhardt: Yeah.
Steve Fitzpatrick: And so that’s where the stress levels tend to start to rise.
Max Reinhardt: Exactly.
Steve Fitzpatrick: And having a little bit of comfort if they knew, well, what actually capitalizing is, where not having that pressure of actually having to pay… Essentially, they are. It’s built into the loan, I can say. But it’s definitely a little bit easier on the stress levels if it’s already pre-approved and prearranged and then you can get on with just building the house and…
Max Reinhardt: Yeah, definitely, yeah. And you’re exactly right. You know, when you’re getting to those last stages, things can get a bit tight. What I normally recommend to people is in the early stages…
Steve Fitzpatrick: Move in with your mum and dad.
Max Reinhardt: That’s a nice little situation, actually.
Steve Fitzpatrick: Yeah.
Max Reinhardt: But I would normally say, “Pay a little bit of extra in the early days.”
Steve Fitzpatrick: Yeah.
Max Reinhardt: So more than what the minimum payment would be so that you’re building up a bit of a buffer.
Steve Fitzpatrick: Yep.
Max Reinhardt: So that when you are gonna, let’s say, capitalize in the interest in the latter stages, it’s not gonna have such a damaging effect to your total loan size.
Steve Fitzpatrick: Yep.
Max Reinhardt: And it will depend on your situation. Yeah, if you’re renting at the same time, it can be pretty tough.
Steve Fitzpatrick: Yeah. But the banks like capitalizing it or are we saying we’re getting a little bit creative here where we talk with the builder and we say, “Listen, can you put in a sort of a pre-start allowance of $10,000 so that we may be able to spend that at pre-start and then we get the finance approval for the full loan and then we get that credited back?”
Max Reinhardt: Yeah.
Steve Fitzpatrick: Or you know, are we being creative or are the banks actually happy to say, “Yeah, we understand it.”
Max Reinhardt: It would depend on the debt-level.
Steve Fitzpatrick: Yeah, that 20% is really important at the moment.
Max Reinhardt: Exactly. Look, the more equity you’ve got, the bigger deposit you’ve got, the better and the more chances of being able to capitalize that interest in. In actual fact, there are lenders… And this is more for the 1st time buyers, although if you don’t own any property, all of this would be relevant as well. There is a lender called Keystart that’s also on our panel…
Steve Fitzpatrick: Yep.
Max Reinhardt: That would allow you to pay just a minimum payment of $50 a week.
Steve Fitzpatrick: Alright, okay.
Max Reinhardt: So essentially, yeah you are capitalizing the interest in. But they just want to know that you are at least committing to paying something.
Steve Fitzpatrick: I actually like Keystart because that’s how I got my… Who I got my very 1st loans through when I 1st bought an established home. And Keystart made it very easy to get into the market. I think at the time, I didn’t need a deposit even though, I’d say I did deposit. So that was handy because it just left some money up my sleeve, you know, to do things when we moved in to actually, you know, change a couple of window treatments and carpets and whatnot. And I think we did do a bit of landscaping, as well. But we got in there, made it nice and easy just getting into the loan. ‘Cos Keystart also only do 3 drawdowns…
Max Reinhardt: Yes.
Steve Fitzpatrick: A maximum of 3, which a lot of builders don’t like because they’re not getting paid very often for their work and a lot of the time, they’re on 30-day accounts and they’re not getting paid for 60 days.
Max Reinhardt: Yeah.
Steve Fitzpatrick: So it’s not nice from a builder’s point of view. Nevertheless, it still gets people into their 1st home. So that’s a big plus.
Max Reinhardt: Yeah, definitely. I mean, Keystart still does have its place. Up until 10 months ago, you were right, you could walk into Keystart essentially without anything in your pocket. And yeah, you could go out and buy your 1st home or build your 1st home with nothing in the bank. But times have changed. It is a government institution and they realized that it probably wasn’t, you know, the most responsible lending practice.
Steve Fitzpatrick: Yep.
Max Reinhardt: So what’s really happened now is they do want to have a bit of a deposit, want to have a 6% deposit.
Steve Fitzpatrick: Oh, really? Okay. That’s actually… Did that only just come in sort of this year?
Max Reinhardt: Yes. See, they’ve gone from the end of last year when the stimulus ended. Look, people were walking away with extra money in their pocket as well. But back then, you needed 2% which could’ve been from the 1st homeowner’s grant.
Steve Fitzpatrick: Yeah.
Max Reinhardt: And then went to 4% late… Oh, when was it? I’m thinking about March. And then roundabout June, they did move it up to 6%.
Steve Fitzpatrick: Right, okay.
Max Reinhardt: So…
Steve Fitzpatrick: And can the 1st homeowner’s grants still go towards that 6%? Do they allow that? Or are they actually looking for you to give you 6% savings?
Max Reinhardt: Yeah, it can go towards it. I have to double check but from memory, I think as long as at least 2% of your savings is what they consider genuine savings… Now by that, they mean that you have actually saved up in your bank over at least a 3-month period or maintained a level of 2% for a 3-month period.
Steve Fitzpatrick: Right, okay. And then you’re allowed to have parents contribute to your savings?
Max Reinhardt: Yes, so as long as the 2… As long as you have your 2% genuine, they don’t really care where the rest of the money comes from…
Steve Fitzpatrick: Okay.
Max Reinhardt: As long as it’s not borrowed.
Steve Fitzpatrick: Yeah, sure. Yes, so that’s fair enough because you know, especially as a, you know, if you’re 21 or 22 years old and you’re earning, I don’t know, 30 grand a year and you’re trying to save money and all the rest of it looks pretty tough.
Max Reinhardt: Oh, definitely.
Steve Fitzpatrick: So they are looking just for 2% genuine savings and then the rest can come from your parents or the 1st homeowners grant or something.
Max Reinhardt: Exactly, yeah. Or mixed, yeah.
Steve Fitzpatrick: Okay, well that’s all pretty good. What about Low-doc loans, what’s the state of Low-doc loans now? Because we hear a lot about them pre-GFC and, you know, everyone’s turning around pointing their finger. They’re saying, “Well, it’s because we gave all of these Low-doc that we’re now in the problem, we’re facing the problem the world is at the moment.”
Max Reinhardt: Yep.
Steve Fitzpatrick: Where are we at, at the moment? Can you still get a Low-doc loan or a No-doc loan?
Max Reinhardt: Yes, you can. Things have got a lot harder. You know, we are in a fairly fortunate position in Australia where, you know, we didn’t have the same sort of issues as the States. You know, they weren’t really that many subprime lenders loans happening.
Steve Fitzpatrick: Yeah.
Max Reinhardt: Really, the banks have come about and done something themselves in terms of they’ve become a bit more responsible. Generally speaking, if you’re going up to, let’s say, 80%, you’ve only got a 20% deposit.
Steve Fitzpatrick: Yeah.
Max Reinhardt: They will still want to pretty much identify you have got that income. And that’s normally done through bank statements.
Steve Fitzpatrick: Right, okay.
Max Reinhardt: Now, there is an exception there. And that would be… We’ve got 2 lenders, actually, that are still going up to 80% without any bank statement. So essentially, that is still a No-doc loan. Then we’ve also had the NCCP come in, the National Consumer Credit Protection Act.
Steve Fitzpatrick: Right.
Max Reinhardt: That 1st stage took effect in the 1st of July. And there’s more implications come the 1st of January. But all that has meant you have to prove that the customer can afford it.
Steve Fitzpatrick: You as the lender?
Max Reinhardt: At the moment, only the broker has to prove it.
Steve Fitzpatrick: Right.
Max Reinhardt: As of the 1st of January, the bank or the lender has to prove it, as well. I think the reason for there being a bit of a lag is that banks and lenders take a bit more time to adjust whereas brokers can be a bit more flexible.
Steve Fitzpatrick: Right, okay. And so when you’re saying you have to be able to prove it, is that just with… I mean, if someone coming to you and saying, “Here’s my income statement statement from my employer. There’s my, you know, my bank statement or here’s last year’s tax return.” Is that enough?
Max Reinhardt: Yeah, so it can be from bank statements. I think the new way around it, and I think this has obviously gone in align with the thinking of the NCCP regulation starting on the 1st of Jan, is an Accountant Declaration.
Steve Fitzpatrick: Right.
Max Reinhardt: So, we’re just seeing 1 lender that will go up to 70% without charging a customer any mortgage insurance which is, you know, a pretty unique product that used to exist but now it’s… Since, you know, the Low-doc started to die down a bit… And all they’re asking for is an Accountant’s letter to say, “Yep, they can afford it.” Or, “This is what they’re owning.”
Steve Fitzpatrick: Right, okay.
Max Reinhardt: Otherwise, you know, under the 60% mark, banks or lenders aren’t really asking for any proof of the income. But as of the 1st of January, they will be. I think, you know, that’s Adelaide Bank basically. I think that’s how they’ve cottoned on to getting around that is getting the declaration from the Accountant.
Steve Fitzpatrick: Right.
Max Reinhardt: But ways that we verify, at the moment, are the bank statements, all the tax returns, or you know, bank statements. So if we can see the cash flow…
Steve Fitzpatrick: Yep.
Max Reinhardt: Maybe if I got like 6 months worth of your last bank statements and averaged that out, then that would satisfy me, as well, and the NCCP.
Steve Fitzpatrick: 1 thing that we haven’t discussed, Max, is refinancing.
Max Reinhardt: Okay.
Steve Fitzpatrick: And I thought we should quickly cover that topic. What are the advantages or when do you think people should start to consider refinancing?
Max Reinhardt: Most people tend to review their finances at least every 3 or 4 years. And, you know, within that sort of timeframe, that is when people tend to do refinance or buy another property or whatever it might be even if it’s downsizing.
Steve Fitzpatrick: Yep.
Max Reinhardt: Normally, the best time to review it is when you are doing something major. Let’s say you’re doing some renovations, you’re consolidating some debt, purchasing another property, whatever it might be. Because then, you’re gonna have to pay some fees to your current lender anyway to do a whole new application.
Steve Fitzpatrick: Right.
Max Reinhardt: So why not review the whole situation and normally, you know, pay the same in cost but get yourself a better deal at the same time.
Steve Fitzpatrick: And so, when you talk about getting a better deal… And at Aussie, I know you’re savers. But when you talk about getting that better deal, what kind of difference can people find? Or what’s some of the examples that, you know, as far as more money in their pocket each week…
Max Reinhardt: A good example… I don’t really want to pick on banks but I’m gonna pick on 1, anyway. Generally speaking, you walk into a bank, they want to sell you the product that’s gonna make them the most money.
Steve Fitzpatrick: Yeah.
Max Reinhardt: So that would normally mean a Standard Variable-type loan.
Steve Fitzpatrick: Yep.
Max Reinhardt: For example, if you’re with West Bank on their Standard Variable, I think it’s sitting at 7.51. And we might be able to get you down to below 6.5%. All of a sudden…You’re saving 1%
Steve Fitzpatrick: Yeah.
Max Reinhardt: You’re saving 1%. Now let’s say average loan size is 300,000, that’s $3,000 a year.
Steve Fitzpatrick: Yeah.
Max Reinhardt: That you’d be better off.
Steve Fitzpatrick: So more money for the Battlers?
Max Reinhardt: Definitely.
Steve Fitzpatrick: We should get you on Today Tonight to talk about saving the Battlers.
Max Reinhardt: Yeah, definitely. And look, yeah, we do come across people that are even more out of market. Actually I got 1 where they’re on about 7.8 or even higher…
Steve Fitzpatrick: Ouch.
Max Reinhardt: And look, for them just to carry on paying what they’re already paying, was gonna shave off… From memory, was gonna shave, I think, about another 9 years off their home loan.
Steve Fitzpatrick: Wow.
Max Reinhardt: At the cheaper rate, obviously.
Steve Fitzpatrick: Well, ladies and gentlemen, that was Max from Aussie Home Loans. And I’d really like to thank Max for being the 1st person that I’ve had on with our podcast series. Max has been really helpful. He’s a fantastic guy, very easy to work with and every client I’ve ever referred to Max has really appreciated the speed in which he works. He’s stationed down in Morley, at the Aussie branch there. His name is Max Reinhardt. Fantastic information, thanks very much, Max.
And to all of our listeners, I want to say this 1st one was a little bit of a mission. This was actually recorded about 6 weeks ago and it’s just taken me so long to get my head around the actual audio software to just edit this. But I hope you enjoyed it. I hope you found the information very helpful. And we’ll be doing more podcasts in the very near future. Thanks very much for listening.
This is Steve Fitzpatrick from Your Building Broker. If you’re thinking about building, we’re the 1st people you should speak to.