E66. Loans and funding your home (Part 1) with guests Carrie and Kirsty from Uploans

In this episode of the Building Design, Prime Time Podcast, we’re joined by special guests Carrie and Kirsty from Uploans, to join the regular duo Frank and Amelia. 

Kirsty and Carrie highlight key areas of the finance world as they celebrate a decade in business as mortgage brokers. Carrie and Kirsty share their expert financial insights, offering valuable tips on how to secure the right loan, manage funds effectively, and avoid common financial pitfalls. They also stress the importance and understanding of aspects such as lenders mortgage insurance and loan to value ratios and how these impact the interest rate you're offered. 

Whether you're planning a new build or a renovation, this episode provides practical advice on staying within your financial limits while achieving your dream home and how you can can plan ahead to achieve your dreams.

Don't miss the chance to hear from these industry experts! Tune in on Spotify to get the tools and knowledge you need to make smarter financial decisions for your next project. And be sure to subscribe and catch all our other episodes there, is a new one released each week! 

About us
Prime Design is a building design company locally owned and operated in Tasmania since 2004.  Our goal is to share as much valuable information as possible about the process of building design, extensions, and more. We will talk about a different topic each week. To suggest a topic you would like us to talk about contact us at info@primedesigntas.com.au

Disclaimer
The information provided on this podcast is for educational and informational purposes only and is not intended to be a substitute for professional advice, individual circumstances, or remedy. We strongly suggest you consult a qualified professional before taking any action based on the information provided in this podcast. The views, opinions, and information provided in this podcast are those of the hosts do not necessarily reflect the official policy or position of any other agency, organisation, employer, or company. All content provided on this podcast is provided “as is” without warranty of any kind. We make no representations as to the accuracy, completeness, currentness, suitability, or validity of any information on this podcast and will not be liable for any errors, omissions, or delays in this information or any losses, or damages arising from its use. We reserve the right to change content or delete any information provided on this podcast at any time without prior notice.

Transcript

E66. Loans and funding your project (Part 1) with guests Carrie & Kirsty from Uploans

(0:09 - 0:39)

INTRO

Welcome to the Building Design Prime Time Podcast, focused on providing valuable information for anyone looking to undertake a new build or extension project. We'll share our tips, tricks and stories from a building designer's perspective. 

(0:39 - 0:47)

Amelia: Hello and welcome to the Building Design Primetime Podcast. I'm your host Amelia. And once again, we're joined this lovely Friday by Frank Geskus. 

Frank: G'day Amelia, how are you? 

Amelia: Oh look, it's Friday, I'm pretty happy.

(0:48 - 0:51)

Frank: And you're buzzed up on coffee too. 

Amelia: I don't drink coffee. 

Frank: No.

(0:51 - 0:55)

Amelia: The hot chocolate did the job though. 

Frank: Oh, you got a hot chocolate with the rest of the gang. 

Amelia: Yeah, pretty good.

(0:55 - 1:00)

Looking out for the wine later though. 

Amelia: Yeah, I'm sure. 

Frank: You haven't seen the new stash that came in.

(1:00 - 1:04)

Amelia: Oh, samples later. 

Frank: Oh, not samples. 

Amelia: Oh, alright.

(1:05 - 1:13)

We'll discuss that later. We've got some really special guests in today. We're going to talk to Carrie and Kirsty from Uploans.

(1:13 - 1:17)

Welcome. 

Carrie: Thank you for having us. 

Kirsty: Thank you.

(1:17 - 1:25)

I'm not a coffee drinker either, so team up with you on that.

Carrie: I am a coffee drinker. 

Kirsty: Carrie's blood is 80% coffee.

(1:26 - 1:30)

Frank: How do you function? 

Kirsty: Tea, mostly. 

Frank: You're one of those. 

Kirsty: Yes, one of those.

(1:30 - 1:36)

Frank: You're like my wife. Yeah, too.

Carrie: You guys had me at the wine stash that you were talking about earlier, so I might hang around.

(1:37 - 1:40)

Amelia: You definitely should. 

Frank: Yeah, we got a nice stash dropped off. It was good.

(1:40 - 1:47)

Amelia: Yeah. Alright, so today we're going to be talking about mortgage brokering. Is that the right term? 

Carrie: Mortgage broking.

(1:47 - 1:50)

Mortgage brokering. I don't know. 

Kirsty: Finance broking.

(1:51 - 1:53)

Finance brokering. Getting the money, basically. 

Amelia: Yeah.

(1:54 - 2:05)

So, people come to you guys and you negotiate loans for them through the banks. 

Kirsty: We do. We've got access to over 40 different lenders on our panel now.

(2:05 - 2:25)

Carrie: It is now. 

Kirsty: Yeah, so we're like the middleman that operates in between the client and the bank. 

Amelia: And sort of, what got you into teaming up together and doing something like this? Because you've come from a real estate background, is that right? 

Carrie: We have come from a real estate background, and we literally fell into this space, didn't we? 

Kirsty: 10 years ago.

(2:25 - 2:40)

Frank: How do you fall into something like that? 

Carrie: We both had experiences in lending, and we found it quite a transactional experience.

Kirsty: Definitely.

Carrie: Not a lot of... 

Kirsty: Holistic attention, I think.

(2:40 - 2:55)

You know, not looking at every part of what our dreams and our vision was for our finances. And, you know, sort of naively, Carrie and I thought, gosh, maybe we could do it differently. Maybe we could do it in a slightly different way.

(2:55 - 3:31)

And coming from that real estate background, we thought, what could we bring from that and then take into this finance world? 

Carrie: And I think because real estate is predominantly about relationship building and maintaining that relationship lifelong, it just made sense to us to be able to transfer that into something that was typically at the time a more transactional experience. 

Kirsty: You'd go to someone and you'd be like, I want to buy a car, and they would help you out with just that. Whereas we wanted to be the kind of brokers that said, OK, well, you're looking at a car, let's also have a look at all of your debt.

(3:31 - 3:58)

OK, why is your credit card doing that? Let's have a talk about your home loan. Do you want to get an investment property later on? Do you want a bit of land so that you can have some horses to run around? How do we figure out what this journey looks like for you over the next 10, 15, 20 years so that we can be part of helping make your dreams come true?

Amelia: I love that it's such, you know, as you said, a holistic approach, because I think people just think of it sometimes as one transaction. It's, you know, but it is more than that.

(3:58 - 4:21)

It's your lifetime of what you want to achieve and what your goals are and how you can work towards that with a mortgage broker. 

Carrie: For the car loan example, is that taking out a rather large car loan can really, really affect things for you in 12 months time, say, when you want to go and purchase property, because it can really affect your borrowing capacity. So being able to look at that at the beginning, OK, let's look at this car loan here.

(4:21 - 4:35)

What's that going to look like for you if you're wanting to buy a house, say, for 500,000? Well, hang on a minute, we can't. So just making sure that we're across everything. 

Frank: And really, that's the advice from people like yourselves to actually analyse everything.

(4:36 - 4:45)

And it's being open and transparent, put it all on the table. 

Kirsty: Yeah.

Frank: And also past credit history, I would suggest, can be a bit damaging as well at times.

(4:45 - 5:13)

Kirsty: It's one of the fun parts of our job. So before we work with any client, we'll get them to organise their own credit checks so that not only do we see what the bank's going to be seeing, but the client sees as well. The number of clients we have who are like, oh, I didn't realise that I had still a Harvey Norman Go card or that the pay-in-four sort of system that I've got would show my credit check or my zip pay or that default that I had with Optus three years ago.

(5:14 - 5:44)

There's so much that shows up there. And so, yeah, credit's definitely one of the things that we look at because it can be the difference between you getting a fantastic interest rate and actually getting either declined or getting quite a high interest rate and really having to pay a lot more for your house or your car or whatever it is that you're looking at than you could have otherwise. 

Frank: Also, if you do some dumb shit when you're younger, you might say... 

Kirsty: Never! none of our clients will ever do that.

(5:44 - 5:55)

Frank: Well, we're all young and silly at some stage and messing with your credit... 

Kirsty: It will come back to bite you... 

Frank: Because it's there for life, isn't it? 

Kirsty: Some of it. 

Frank: Some of it is. 

Carrie: And some of it will drop off.

(5:55 - 6:17)

The other thing to be careful with credit reports and the reason that we get them up front also is that there can sometimes be things on your credit report that are incorrect. I had an example recently where a mother's name and a daughter's name was very similar and they had the same registered address. The daughter wanted to go and get a home loan.

(6:18 - 6:45)

The mother had some bad credit history that had been put onto the daughter's credit report in mistake. So therefore, that borrower who had no adverse credit history actually was not in a position to be able to get a home loan. Now, they were able to go back and have that sorted out, but thank goodness we requested that credit check up front before we submitted to a lender because it just would have been instantly declined.

(6:45 - 6:59)

Kirsty: I've had the same thing with twins. 

Carrie: Really? 

Kirsty: Twins have had different things that should have appeared on their own credit report on the other ones. And so, yeah, it's... 

Frank: How does it... I shouldn't ask how it happens because it's just a world of... 

Kirsty: Human error.

(6:59 - 7:02)

Human error within the banks.

Frank: In this world of technology, human error. 

Kirsty: Exactly.

(7:03 - 7:30)

Frank: So with loans, is credit history really important? If you don't have a credit history, say you've always done things with cash, I don't have a card, what's the best? 

Carrie: I feel like this one's a bit of a myth and a lot of people get caught up in it. There's sort of two parts to that. If someone has not had a credit card before and they're a first home buyer and there isn't a credit file for them, it does not go against them.

(7:30 - 7:43)

Kirsty: And people get caught up in it because in America, if you don't have a credit history, you would really struggle to get a home loan. You need to establish it. 

Frank: So it’s us watching all this American TV that we think that's planted in our head that might affect us here, which is a lot of rubbish.

(7:43 - 8:04)

Kirsty: Whereas I love it when you get a first home buyer who has no credit history because then they don't have a credit card, they don't have a car loan, they don't have anything that's potentially dragging their credit down. Now, yes, if you do have some sort of a credit facility, it can be helpful as far as building up a credit history, but there's also the risk. Like if you're a young... Let's say you've had your savings account at the bank since you were four years old.

(8:05 - 8:11)

At 18, they offer you a credit card and you take it out. And again, you do some dumb stuff. Then suddenly you've got a bad credit history.

(8:11 - 8:31)

I would much rather someone with no credit history over anything negative whatsoever. And if they get something like that car loan, which is a very common first piece of debt for someone young, the impact on the borrowing capacity for the people can, like Carrie said, rule them out of being able to do anything. So no credit is far preferable to bad credit.

(8:31 - 8:34)

Frank: That's good to know. 

Kirsty: Absolutely, yeah. 

Frank: That's awesome.

(8:34 - 8:54)

Kirsty: And we're kind of believers as well in this concept as well, that the easier debt is to get for you, probably the worst it is. So I wish if there was one thing I could get out there to young people in Australia, your future clients, our future clients, is that if something's really, really easy to get, it's probably going to be bad fee. Pretty easy to go out there and get a store card, a credit card, zip pay.

(8:54 - 9:05)

Frank: Those store cards are unbelievable. 

Carrie: And people forget they have them. A lot of the debt that we see on credit reports, the bad debt is from something like that where there might be a $5 per month admin fee.

(9:05 - 9:18)

People have forgotten about them, might have moved addresses and haven't been receiving them. And then all of a sudden they have late payments showing for the last six months because of it. 

Kirsty: And the bank don't care if it's $5 or $500, it's late.

(9:18 - 9:25)

Frank: And I had a bad experience with one of those many, many years ago. And I went to, hey, I've got the money, I can clear this. They wouldn't let me.

(9:26 - 9:33)

Carrie: Right, 

Amelia: what? 

Frank: They wouldn't let me. 

Amelia: They wouldn't let you clear your own debt? 

Frank: Well, no, to pay it off early. This is a really early in-store one.

(9:33 - 9:39)

And I said, hang on, this is bollocks. It says I want to pay it off. No, we want you to keep paying it until it finishes the end.

(9:39 - 9:50)

Kirsty: Well, that's it. Every time a bank gives you interest-free debt, their hope, or not necessarily a bank, a lender of any kind, their hope is that you don't pay it off because then you're going to be stung with a 24% interest rate at the end. That's where they make their money.

(9:50 - 10:08)

Carrie: Or one of the worst ones that I've seen, 54% interest rate. And this kind of predatory lending, they actually prey on young people who don't have a lot of financial education. I had a client who came into the office the other day and she kept saying about this debt that she had that was 4%, but it wasn't 4%, it was 4% per month.

(10:08 - 10:17)

That's how she'd been quoted it, 4% per month times 12. We're talking right up there in ridiculous states. So it's appalling, yeah.

(10:17 - 10:27)

But this is where we have to work with our kids and our young people to make sure that they are getting good advice. 

Frank: But no one teaches them, teaches you read and write, but they don't teach you financial literacy at school. 

Carrie: Historically, no, no.

(10:27 - 10:41)

And I think I'm seeing that there is a slight shift in that now because we're seeing that financial literacy is a massive gap in the lives of Australians. 

Kirsty: But at least we were all taught recorder. 

Carrie: Yes, we were.

(10:41 - 10:55)

Kirsty: That's been very helpful. 

Carrie: Hot cross buns, hot cross buns. 

Kirsty: But no, actually my kids are just going into high school now and there's a subject that my eldest could have chosen called money smarts, which was all of this kind of stuff.

(10:55 - 10:59)

And I loved seeing it on there. 

Frank: Shouldn't I have... 

Kirsty: That shouldn't be an option though. That should be compulsory.

(10:59 - 11:07)

Frank: It should be mandatory. And maybe there's a whole bunch of stuff we could teach them about life.

Kirsty: Yeah, absolutely.

(11:08 - 11:13)

Frank: Don't put stuff on social media that you shouldn't. 

Carrie: Yeah, yes. 

Frank: Don't take your phone with you when you go out of town.

(11:14 - 11:20)

whole the subject. 

Amelia: I'll just stick to cats. 

Kirsty: That's for the parenting podcast.

(11:20 - 11:22)

Oh, yes. That’s afternoon. We’re recording that with wine. 

(11:23 - 11:33)

Carrie: I absolutely agree with what you're saying, yes. 

Kirsty: But I mean, surely our parents raising us would have been as terrified about the things that we're terrified about now for our little people. It's just different things.

(11:33 - 11:41)

Amelia: You're so right though, because it's more than just learning about savings and all of that sort of stuff. You're not taught to invest. 

Carrie: No.

(11:41 - 11:52)

Amelia: That's a whole different topic, you know? But back in the day, you know, your parents would say, oh, you know, put your $5 pocket money in the piggy bank kind of thing. But you're not actually told what to do with it. 

Carrie: No.

(11:52 - 12:06)

Kirsty: And there's so many great options. I mean, there's a first home super saver scheme that's out there at the moment, which is wonderful for a lot of first home buyers. And I had a young nurse come to me last year and say, I'd really like to be able to buy a home one day.

(12:06 - 12:13)

And she'd saved up about $12,000. So we were still a ways off. And I said, oh, look at your payslip here.

(12:13 - 12:21)

I can see you putting some extra into super. And she said, well, my parents told me to do that. As soon as I got my first job, I've been doing that the whole time.

(12:21 - 12:27)

She was mid twenties. We looked, $25,000 extra in super.

Amelia: Oh, wow.

(12:27 - 12:38)

She could utilize that under the first time super saver scheme. And she bought her first home last year. So there are lots of ways that we can actually work with our kids so that that saving is happening earlier on.

(12:38 - 12:53)

But yes, if there was one thing that I wish all kids were taught, it's the power of compound interest. You know, just that start early, start young, keep going with it, because that's the biggest, most powerful thing in the entire world. And it works in reverse with your home loan.

(12:53 - 13:05)

So someone would say a $300,000 home loan pays just an extra $50 a week off it. They pay it off six or seven years faster, which is great, but they save $50,000 in interest over the life of their loan. 

(13:06 - 13:09)

Frank: That's really interesting. 

Amelia: That's incredible, isn't it? Yeah. When you think about it.

(13:09 - 13:24)

Frank: We've done that all the home loans that we ever had and did exactly that. And it's utterly smashed them. 

Kirsty: And again, that's not something that the banks are necessarily going to tell you because that's where their billions of dollars of profit are coming from, from the interest you're paying.

(13:24 - 13:38)

And that's why it's great to be not beholden or tied to any motivation for the banks to make money. We're just here to help our clients get what they want and then help them get rid of that debt as quickly as possible. 

Carrie: And there's some really good calculators on the Money Smart website as well.

(13:39 - 13:56)

There's some great tools that I send through to so many of my clients. And they'll actually have some great little systems where you can pop in, say you're paying $20 extra a month. What's that going to save you over the life of the loan? Yeah, little tools like that can be really helpful, particularly because we're not taught how to calculate that out.

(13:56 - 14:03)

So having these tools to have a look at it and work it out for yourself is really good. 

Amelia: It does give you at least a little bit of a rough gauge. 

Carrie: Yeah.

(14:03 - 14:21)

Amelia: So what are the benefits of going to a broker over going to the bank yourself? 

Carrie: You did this yesterday, basically. 

Kirsty: Oh, the team asked this question and then I recorded a tiny mini podcast for them on our group chat. Gosh, there are so many benefits.

(14:22 - 14:36)

Number one, you get to deal with a lovely human like Carrie or myself, and we're a lot of fun. And we do try and make the process really fun and approachable and understandable. So I know I've walked into banks before and I'm a relatively smart, well-educated person.

(14:36 - 14:48)

And sometimes I’ve felt overwhelmed by the jargon and the language that they're using. So our whole communication style, we've always erred on the side of friendly rather than formal. We want to be informative and educational.

(14:48 - 15:00)

But also really understandable. So you want a broker that's going to make things clear and understandable. Explain the pros and the cons to everything because there are pros and cons to different banks, different products, all sorts of things.

(15:00 - 15:11)

So you want someone that's going to be a great communicator. It's funny, I think the biggest myth to do with broking is that people think our job is to get someone the cheapest interest rate. It's definitely a component of our job.

(15:11 - 15:31)

But if I told you I was going to get you the cheapest interest rate, but when we put the home loan in, it was going to be declined because of your situation, that's not really the outcome that you want. Exactly, so first of all, our job is to figure out what makes you special and unique. And sometimes that special and unique can be a little bit out of the parameters for some banks.

(15:31 - 15:41)

We've got to find what banks you fit into. And that's why we have 42 different banks, I think it is at the moment on panel with more coming on all the time. Thousands of different products.

(15:41 - 15:49)

No one is probably going to get approved at every single bank. We've got to figure out where you fit. Someone might be casually employed or self-employed.

(15:49 - 16:03)

They might have had a break from work for maternity leave. They may want to do an amazing build like the ones I say up on the wall here, but the valuation only works at this lender. So that's really our job.

(16:03 - 16:18)

It's that whole puzzle pieces, how to find the right lender. And then we look at how do we get you the best rate within there? And how do we work on a long-term plan to get rid of that debt for you? So there's so many reasons to use a broker. And primarily, I guess, brokers get paid by the bank.

(16:19 - 16:27)

And so it shouldn't be costing you more to use a broker. You should just be getting the best outcome out of whichever lender you're going with. Lots of reasons.

(16:27 - 16:45)

Amelia: And more options really too, isn't it? Which is really good. 

Carrie: And the service we're going, I think is another thing to bring up here. So I know not everything is about rate, but we want to be making sure that your interest rate is as competitive as it can possibly be ongoing.

(16:45 - 17:03)

Kirsty: And left to their own devices, no bank in the country will leave your interest rate at the amazing rate that they're going to offer you to begin with. You've either got to be pushing back on them as the client and the consumer, or you've got to have a broker that does that for you. 

Carrie: So one thing that we do is annual reviews.

(17:03 - 17:26)

And we reach out to our clients leading up to the anniversary of their loan every year, and do a quick check-in just to make sure that their interest rate is competitive, if their situation has changed, if there's something that we could be doing better. Our clients are more than welcome to reach out to us well before that annual review. And we make that very, very clear to them that they can come to us at any time.

(17:26 - 17:49)

But reviewing your loan at least annually is just so, so important, because quite often we can go and squeeze a little bit more out of your lender that can end up being, equating to $1,000 extra cash in your pocket a year, which is really, really important to do. But you're never going to have a bank reach out to you and say, hey, let's revise your interest rate and see if we can do a little bit better for you. 

Kirsty: Unless you try and leave them.

(17:49 - 18:02)

Carrie: Yes, then they do.

Kirsty: Then suddenly you're back in their good stakes again. And it's funny, we actually started tracking the savings that we were getting for clients, because I was just curious as to how it was going.

(18:03 - 18:15)

And at one stage there, our reprice team were averaging about $17,000 a day in savings for clients. 

Carrie: Over the life of the loan

Kirsty: And we stopped counting once it, no, no, a year. 

Carrie: A year? 

Kirsty: A year, we only tracked it per year.

(18:15 - 18:24)

Amelia: Holy moly. 

Kirsty: And we cut off tracking it after a million dollars worth of savings, but that took us just over a year to actually do that for clients. 

Frank: That's very cool.

(18:24 - 18:37)

Kirsty: Yeah. 

Frank: I suppose what you guys do is preparing the potential lender prior to going to the banks. So we were talking before looking at the credit checks, but trying to find the right package for them as well and understand them.

(18:37 - 18:43)

Kirsty: It's like a matchmaker service sometimes. It is. You look at the client and you go- It's almost like an arranged marriage though.

(18:43 - 18:51)

Yeah. You go, oh, okay, you like long walks on the beach in Pina Coladas, and this bank doesn't, so we're not gonna take you there. Like it almost is.

(18:51 - 19:08)

It's, you just nearly have, those days where we get someone who's very vanilla Carrie and they could go to any bank, those are few and far between, I'd say.

Carrie: Yes. 

Kirsty: We get people who are limited by the amount of deposit they've got, the type of income they've got, the credit history they've got, where they want to do something.

(19:09 - 19:26)

I mean, the postcode restrictions that banks have. 

Frank: Yeah, I've always been fascinated by that.

Kirsty: If you're a lovely, loyal customer to your bank, you might not have any idea that the bank won't do something in the postcode you wanna buy because it's got a mining overlay or because they just have like a risk parameter that says, no, we're not happy to lend there.

(19:26 - 19:38)

Frank: You're regional. 

Carrie: Yeah, you've got some lenders at the moment that won't lend on vacant land, that won't do construction. You've got lenders that have restrictions on how much they'll lend to you in certain zoning.

(19:38 - 19:51)

And the different zonings that have popped up, even since we've been broking, are quite interesting. And a bank might say, we'll only lend to 70% to you on that one. But hang on, we'll go to 95% for you on that one.

(19:51 - 20:09)

And then you've got a lot of lenders that are pulled out of, if they still are lending on vacant land, they might've previously lent up to 95%. But now, hang on a minute, we're only lending to 90%. So there's a lot that we need to be across in all different scenarios, whether it be land or building, serviceability, borrowing capacity.

(20:10 - 20:36)

That's a huge issue for us at the moment, not only because rates have risen so much in the last couple of years, but because the cost of living has also risen over the last couple of years. So banks are assessing you, obviously, at a higher interest rate. Most banks need to also put a 3% buffer on top of that, because that's what they have to do.

(20:36 - 20:57)

And on top of that, the living expenses that they use as a benchmark overall are a lot higher than they were over the last two years as well. So you're coming up against policy issues, loan to value ratio, postcode issues, and borrowing capacity, we're kind of getting hit on all sides of it at the moment. So it is getting increasingly more difficult to be a broker.

(20:57 - 21:11)

Frank: And complex. 

Kirsty: Yeah, sometimes we get down to one lender. Sometimes we're like, well, we'd love to give you two or three options to chat about here, but you are very special, and this is the right lender for you right now.

(21:11 - 21:14)

Frank: Special. 

Kirsty: Special. In inverted quotes.

(21:15 - 21:46)

Frank: What are the tips would you give someone, or a couple or a single person, to wanting to get a loan, get a house, whatever it may be? Most likely we're talking about real estate, because that's the big Aussie dream. Because like we were just talking before, some people just sign up a contract and think they can go get their money, and it doesn't quite match to their borrowing capacity, which can be a bit embarrassing and plain annoying to the real estate agent.  So what tips could you give people if you're planning to go buy a house, or a unit, or just for yourself, not an investment property, because that's a different level of complexity.

(21:46 - 22:23)

What tips would you give, because if you're planning a couple years ahead, I haven't quite got the money, what should you be doing? 

Carrie: I’ll Jump in to start, one of the first things that I would suggest is to get in front of a mortgage broker for an initial meeting. Some of the very best client relationships I have now, 10 years in, are people that I met with that might have had no savings, limited borrowing capacity, and a dream to purchase their first home. And there's nothing more rewarding, I find, in our job, when you start with a client, and you tell them, okay, this is where we need you to be.

(22:24 - 22:48)

And I know Kirsty does this a lot as well, and I think, please expand on that. But sometimes I'll have clients that I meet with once, twice, three times over a two-year period. The clients that do everything we talk about, put a savings plan in place, work hard, take the overtime if they can, and then turn around in two years and say, I'm ready to go, they're the clients that are the best to work with.

(22:49 - 23:05)

Kirsty: Absolutely, and that's a big part of our job, that future planning, forward planning. Sometimes people come to you and they're ready to go straight away, and that's fantastic. But we'd much rather see someone early and be able to put that plan in place that we know is rock solid for them, so that they can get there.

(23:05 - 23:29)

Because otherwise, they're just guessing. But simple tips that anyone can do as well, limit any of those easy-to-get debt facilities, credit cards, afterpay, zip pay. There's something known as the afterpay effect, where if you look at this fantastic drink bottle here, and it's $80, but you buy it on afterpay, you're gonna pay four easy installments of $20, and your brain is just seeing $20.

(23:29 - 23:43)

So you'll actually spend more if you have facilities like that. So getting rid of those sorts of facilities where possible, building up that savings history. If you're living at home, stay at home if you can do, if it works for you and your lifestyle.

(23:43 - 24:04)

Frank: Just put up with mum and dad. 

Kirsty: Absolutely, because you'll never be able to save like you will be living under that scenario. If we've got people that are living at home, and they have parents who want to help, one little tip, I don't know if you're still getting this, but I'm still getting first-time buyers all the time, going, oh, I didn't want to touch my savings, so I put it in mum or dad's bank account.

(24:04 - 24:11)

That's not very helpful. It'd be great if it was in your bank account, and you just cut up a card to it, or didn't have any access. 

Frank: Probably because they're students too.

(24:12 - 24:21)

Kirsty: Yeah, maybe. But that's where they could be contributing to the first-time super saver scheme, or something like that, if they want a way to save and not actually touch it. But yeah, absolutely.

(24:21 - 24:33)

Say someone like Carrie or myself early on, put a plan in place, and follow the plan. It won't be rocket science. 

Frank: I find that interesting, because I still think the mindset's out there, oh, I'll just go get a loan.

(24:33 - 24:42)

And the money's easy to get. And obviously it is, those days are gone. Well and truly, as of my past experience the last couple of years, it's been very, very painful.

(24:42 - 24:55)

Then building the plan is a great idea, because then you've got direction, you've got a goal. 

Kirsty: And someone like an accountability buddy. Just go check in, we'll be like, hey, you said you were gonna be saving $500 a week, how's that going? You should have this much by now.

(24:56 - 25:06)

And then if you know that's coming, that's like that accountability buddy that you go to the gym with. You're far more likely to go to the gym if you've got someone there waiting for you. We're like that, but with a savings and house plan.

(25:06 - 25:14)

Carrie: And this could work not just for first-home buyers. This could actually work for someone that already has a home, and they're wanting to do that next thing. It's the same conversation.

(25:14 - 25:40)

Where do I want to be? How do I get there?

Kirsty: To upgrade, to renovate, to buy an investment property, all those fantastic next steps that still are outside of the comfort zone that they're in right now. 

Carrie: And with first-home buyers getting in front of us, a lot of people aren't aware of the different schemes that are around for first-home buyers at the moment, because there's quite a lot. There's schemes for first-home buyers at state level, at federal level.

(25:41 - 25:48)

There's all different things that they could be eligible for. There may be the ability to use a parent as guarantor. 

Kirsty: The first-home builders, boost.

Carrie: Yeah, first-home builders, Bruce.

(25:49 - 26:01)

Carrie: So there's a lot of things that people aren't aware of. So that first step of getting in front of us to have a good conversation, and I actually find that that needs to be a good 45 minutes to an hour first meeting, to be honest. 

Kirsty: She says that.

(26:01 - 26:09)

It could be two hours, because Carrie loves it. She's like, let's dig in.

Carrie: But there's a lot to go over, you know, by the time.

(26:09 - 26:30)

Frank: So in the past couple of years, we've been talking about, you know, the Australian dream's unaffordable, and obviously in certain areas, that may be the case. But what you're telling me, and the media's not saying, there are avenues, different avenues people could go down to be able to reach their dreams of owning their own home. Start that, sorry, start the journey to own their own home, because the bank will own it for a long time.

(26:31 - 26:49)

Kirsty: But I mean, how fortunate are we to be living in Tasmania and recording this? So our younger people have a much easier foot in the door than a lot of other people in other states. But we work with buyers all across the country. I've done first time purchases in every single state and territory in the country.

(26:50 - 26:59)

It's possible. Sometimes in areas where the average purchase price is higher, parents tend to help more. So there's ways that a parent can help.

(26:59 - 27:08)

Guarantor gifts. 

Frank: And I'd imagine there would be challenges with guarantors being guarantor as well. There's a risk involved there as well.

(27:08 - 27:19)

Kirsty: We will often meet with the clients, decide that that's an option that they wanna go down. And then when we chat with the guarantors, our job is to tell them everything that could go wrong. All of the bad things that can happen with it.

(27:19 - 27:34)

And in some ways, I almost try and talk them out of it if I possibly can. If there's another way to do it, we will go down that road. And if we do end up going down the guarantor side of things, I want the kids to have a really solid plan in place as to how they get their parents off that loan as guarantor.

(27:35 - 27:50)

Because if they pay it down as slowly as possible, mum and dad could be on that loan for nine years and it's just far too long. Especially in a market that is not consistently rising as well, it could be longer. So the kids have to commit to a really good plan before I'll recommend that.

(27:50 - 28:00)

Frank: And that comes down to a level of discipline as well. But let's be fair. So if a little kid comes along, that also affects the whole- Correct.

(28:00 - 28:10)

Kirsty: Borrowing capacity as well. Babies are no good for borrowing capacity, are they? 

Frank: Yeah, well, and that's just life, isn't it? It makes it real hard. And if your dream is to have kids, awesome.

(28:10 - 28:22)

But it does make it harder and harder. Because I remember it myself, how many dependents have you got? Wow, that actually smacks you. Borrowing capacity- 

Kirsty: Each child can drop $70,000 off borrowing capacity sometimes.

(28:22 - 28:25)

Frank: It's amazing. I had three at home one stage. 

Kirsty: There you go.

(28:26 - 28:32)

Just drop 200 grand off your total lending capacity. And you can't even sell them for that much. 

Carrie: No.

(28:32 - 28:41)

Frank: No, no. You reckon? Not for scientific experiments. 

Kirsty: And that's another podcast.

(28:42 - 28:53)

Frank: I think it was a Monty Python, wasn't it? 

Amelia: This is gonna be a very interesting one to edit. For sure. All right, let's talk about loan-to-value ratios.

(28:53 - 29:22)

Now, they're pretty important when it comes to loans. What is an LVR and what is the best LVR to have? 

Carrie: So loan-to-value ratio is the amount that you are borrowing compared to the value of the property, okay? So if you have a 20% deposit plus costs, your loan-to-value ratio is going to be 80%. If you have 5% plus costs to contribute, your loan-to-value is going to be 95%.

(29:22 - 29:47)

Kirsty: And typically, the lower, the better. So 80% puts you in the low-risk category with most banks, which means that probably the biggest thing is that with most banks, then you're not gonna pay any lender's mortgage insurance. Lender's mortgage insurance, I think, is probably the most misunderstood term in finance because people hear it and think that it's some kind of insurance for them as the borrower, but it's not.

(29:47 - 29:59)

It protects the bank. If you mess up, default on your home loan, don't end up being able to pay a bank and the bank has to sell it for a loss, that lender's mortgage insurance protects the bank. It does not protect you, and in fact the lenders mortgage insurer will come after you for the debt. So not only do you pay it, it doesn’t protect you but also you can end up incurring a debt associated with it. Wherever possible the bigger the deposit the better but sometimes to get a foot in the door you make a start at 95% loan to value ratio (LVR) and some of the great schemes that Carrie was talking about earlier on can actually help first home buyers get into the market at 95% with no lenders mortgage insurance.  

Frank: I remember doing that a long time ago.  It was at 95% 

Carrie: That was my first home purchase. Exactly the same 95% paid lender mortgage insurance and that’s where I do say to people. So number one exactly what Kirsty’s saying I explain mortgage lenders insurance (LMI) to my clients as a risk fee essentially. I try and take the word insurance out of it so that they’re very, very clear that it’s not an insurance that’s covering them. On the other side of things if clients do need to pay lenders mortgage insurance to get their foot in the door, to get that property, there are no other options I tend to use the story of the fact that I got into the market, yes I paid lenders mortgage insurance (LMI), I slammed down that debt as quickly as I could so that I could then purchase the next property and have that equity in that first property.  So it’s not always a bad thing. But it is great to avoid it when you can.  

Frank: If possible, you know. 

Carrie: The other thing that we’re seeing a lot more of is what we call tiered pricing on loan to value ratios (LVR). So it used to be typically you’d have a certain price is something was under 80%, you might have another interest rate if it was between 80-90 and then if its between 90-95% you’re really going to pay that higher interest rate as well as lenders mortgage insurance, typically.  What we’re seeing a lot at the moment in the market is that lenders are pricing differently under 60% between 60-70% and between 70-80% so the interest rates are changing not just to 80% now. 

Kirsty: It’s good because they’re low risk loans now 

Carrie: So the good thing is about that is that when we’re doing annual reviews for our clients that bought a few years ago and the value of their property has increased significantly a lot of the time we’re able to either reprice with their existing lender and if they’re a good lender reprice at the tier they’re offering new clients, if they won’t come to the party refinance them elsewhere where they are actually able to get that lower tier pricing.  So there’s a fair bit happening in the market with that so loan to value ratio is very important.  

Kirsty: And it’s nice being a broker because I remember when I used have my loans with a big bank back in the day and I’d want updated valuations done. The valuations cost the bank and they were quite hesitant to do them and I remember once even when the market was rising I was like look I’ll just pay for it, and I paid four or five hundred dollars per property to get them done because I knew it would help me, but as brokers we get valuations with most of the lenders at no cost so if you’re currently sitting at say 75% and that pricing and we think you’re at about 65% now and we can get you an interest rate drop we can utilise their valuation systems. 

Frank: Yeah, nice

Kirsty: And go and organise that for you. It’s all part of the service. 

Frank: Which I find a fascinating service, cos it’s not like here’s a loan, see ya

Kirsty: It is sometimes with brokers 

Frank: Yes

Kirsty: And I’m not slamming brokers that do that, it’s very, very difficult to provide ongoing service for lots and lots of clients, we’re just lucky that we’ve got an awesome admin team that support us in that. If it was just Carrie and I trying to do that it would be very hard to do. 

Frank: Because that admin process…I find that quite an exceptional the level of service that you’re doing annual reviews so you’re helping out your customers to get the best value. 

Kirsty: Even if the customers get time poor and don’t reply to us, we’re still going in and repricing them because we kind of feel like that’s our obligation to people

Frank: I love that 

Kirsty: Because we set you up with this debt, we want to make sure there’s a plan to get rid of it to keep it as competitive as possible 

Carrie: So what Kirsty means there is let’s just say that we reach out to a client to do their annual review and we don’t get a response, we’ll try a couple of avenues to get hold of them, if they don’t, then we’re just going in and trying to reprice them anyway. So we’ve had a couple of clients even this week where I’ve been able to have an email sent out from our team that says, hi I just wanted to let you know that we’ve been in and repriced, just letting you know that equates to a $600 saving per year. Clients come back like what on earth have you just done that is amazing!! Because they haven’t instigated anything of it. So we’re lucky to have the team that we have, they really fight on pricing 

Frank:  Wow that’s awesome, that’s totally awesome. It’s a never ending service. You know. People are going to remember that

Kirsty: It is. We set up people with 30 year home loans, if we left them and didn’t do anything their home loans would be uncompetitive within a couple of years. But it’s funny you read through our Google reviews, most of them are actually about the repricing service later on.  So Rose and our team that head up that in our office they make us look good don’t they Carrie. 

Carrie: They Do! We do remember to thank them very, very well. 

Frank: But that’s your point of different, compared to other brokers 

Kirsty: Absolutely, we’re stalkers, yes

Carrie: If you don’t reply to us we’re still repricing them. 

Kirsty: I’d just rather see it in our clients pockets than the banks pockets.  

Frank: Or alternatively, you’re still paying off more, off your principal and interest. 

Kirsty: Absolutely. 

Frank: You want to get that thing knocked over as quickly as possible 

Amelia: We might wrap up part one there with Carrie and Kirsty from Uploans but stay tuned because next episode we’re going to dive straight into part 2. Thanks for listening to the Building, Design prime Time Podcast, we’ll catch you all next time. 

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