Building Design, Prime Time
We are building designers from Prime Design. We created the Building Design, Prime Time podcast, to provide valuable information for anyone looking to undertake a new build or extension project. We share our tips, tricks and stories from a building designer's perspective.
Building Design, Prime Time
E67. Loans and funding your home (Part 2) with guests Carrie and Kirsty from Uploans
In this episode of the Building Design, Prime Time Podcast we’re joined once again by special guests Carrie and Kirsty from Uploans, alongside Prime Design's own Frank and Amelia. Together, they tackle the critical topic of keeping your building project on budget.
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. Frank adds his perspective on how planning, design choices, and material selection can all impact your overall budget.
The conversation covers the challenges of financing a home purchase, especially regarding finance clauses and settlement delays. They explain how COVID-19 caused major setbacks in banking processes, with some banks taking up to 40 days to assess applications, although the situation has improved. Kirsty also discusses ongoing issues with paper-based settlements in Tasmania, rising costs in construction and renovations, and the difficulties of obtaining accurate property valuations, particularly with rising material and labor costs. They emphasise the importance of planning, obtaining pre-approval, and aligning builder quotes with financing timelines.
Carrie and Kirsty both also emphasise the importance of early financial planning and seeking guidance from mortgage brokers and how borrowers should aim to reduce easy-to-access debt like credit cards and Afterpay, maintain savings, and, if possible, stay with parents to save money.
First-time buyers are encouraged to take advantage of government schemes and build relationships with brokers for long-term planning. Additionally, they explain the significance of loan-to-value ratios (LVR) and how a higher deposit can reduce borrowing risks and lender's mortgage insurance fees.
Don't miss the chance to hear from these industry experts! Tune in and subscribe on Spotify to get the tools and knowledge you need to make smarter financial decisions for your next home, extension project, or renovation. Listen now!
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.
E67. Loans and funding your home (Part 2) with guests Carrie and Kirsty from Uploans
[INTRO] (0:08 - 0:24)
Hello and welcome to the Building Design Primetime 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.
[Amelia] (0:26 - 1:31)
Hello and welcome to the Building Design Prime Time Podcast. I'm your host Amelia and once again we're joined by Frank Geskus and we welcome back our special guests, Carrie and Kirsty from Uploans. If you've been following along from last week, we welcomed Carrie and Kirsty who were talking to us about the finance industry and mortgage brokering. So without further ado, we're going to dive straight into part two. Enjoy everyone.
So if people are looking to purchase a house, how long would you say a finance clause needs to go for?
[Carrie]
That would be dependent on whether or not they were pre-approved and the sort of employment they have, etc. So generally at the moment, banks are quite fast, generally, as a rule. There's always exceptions to that, but in COVID times, we were seeing banks…
[Frank] (1:32 - 1:36)
As soon as you mention COVID times, people are like, oh, so depressing , it was bad it was awful.
[Carrie] (1:36 - 1:43)
There was one very large bank that we're all very familiar with that blew out to 40 business days to pick up an application.
[Amelia] (1:43 - 1:44)
Oh, wow.
[Kirsty] (1:44 - 3:09)
Yeah, three months for actual assessment.
[Carrie]
Yeah, and policy was dictating at that time that there were certain clients that really needed to go to that particular lender. It was horrendous. Most lenders I'm finding at the moment are picking up applications within two to three business days. However, we're in a time where banks are requesting a lot of information. So if we put up an application as clean as we can and we go exactly as per the lender's checklist on what we need to provide, you would think that you would give them that and they would approve the loan and you would move on.
Okay.
[Kirsty]
Sometimes that happens.
[Carrie]
Not as often as we'd like. We call it a one-touch application. If that happens, we have a gong and we celebrate because it doesn't happen as often as it should. In saying that, they will generally come back and request information.
We supply it back to the bank. It might take another couple of days for them to pick it up. So a standard finance clause would be very roughly around 21 days at the moment, 28 days with some lenders.
If you're pre-approved and fully assessed pre-approval, so that means that bank has actually had a human being pick up that application and fully assess that pre-approval application, we're having clients being able to put in seven days, ten days in some instances with some banks that are fast, which can give them an edge over other buyers if it's a multiple offer situation.
[Frank] (3:09 - 3:21)
I do find though, once you've done that, it's then the settlement component is the thing that seems to drag it for one reason or another.
[Carrie]
Yes.
[Frank]
Sometimes it's the bank. Sometimes it's the conveyances. It's a whole range of things.
[Carrie] (3:21 - 3:35)
And some of that is because, there's many reasons on that, but some of that is because in Tasmania, we're still dinosaurs in the dark ages and we still do paper settlements.
[Kirsty]
Human beings get in a room and switch paper between them, checks, titles. It's crazy.
[Frank] (3:36 - 3:39)
That must drive you mental considering you like a paperless business.
[Kirsty] (3:40 - 3:49)
I love a paperless option. I mean, the bank still wanted us to fax stuff to them about three seconds ago. I'd rather send it over on my dinosaur rather than fax it to them.
[Frank] (3:49 - 3:50)
I like my stone tablet.
[Kirsty] (3:51 - 4:12)
But the thing is, there are so many moving parts to our job and there are so many amazing people that we work with, conveyances, land titles office, the settlement people within the banks. There's just a million different moving cogs that put the whole piece together. And if one of those cogs goes awry, it can derail everything.
[Frank] (4:14 - 4:17)
Misreading or misunderstood or think you need this.
[Kirsty] (4:17 - 4:17)
And everyone's human.
[Frank] (4:17 - 4:25)
We are.
[Kirsty]
Yes.
[Frank]
And it can be very frustrating, especially when you've got your heart set on settlement.
[Carrie] (4:25 - 4:25)
I know.
[Frank] (4:26 - 4:26)
I can move in.
[Carrie] (4:26 - 4:27)
I know.
[Frank] (4:27 - 4:29)
I can plan this. I can plan that. Shattered.
[Carrie] (4:29 - 4:38)
I pre-empt things a lot with my clients at the moment to say, please, please, please don't rely on settlement day because we are seeing things fall a little bit out…
[Frank] (4:38 - 4:45)
Some people cut it so fine though. But also like when you've got new builds too, when you're looking at valuation.
[Carrie] (4:46 - 4:46)
Yes.
[Frank] (4:46 - 4:47)
The cost of the build.
[Carrie] (4:48 - 4:48)
Yes.
[Frank] (4:48 - 5:00)
And it doesn't necessarily line up. And for as long as I've been in this game, that has been a constant battle because the valuers can't see the difference between a flat site and a steep site.
[Kirsty] (5:01 - 5:37)
It's that they can see the difference, I think, but that they don't necessarily feel that the extra amount that's going to go into the engineering and all of that side of it is going to amount to extra value.
[Frank]
Just the extra structure you need and the driver you need.
[Kirsty]
A lot of the time, because we see all the nitty-gritty that comes through in the valuations, and the valuer will say, okay, build quote was $600,000.
We think it's going to cost $600,000 to build. However, we think it's going to add $450,000 worth of value to what the land costs, and that's where you run into those difficulties because the valuers are there, I guess, to prevent the lenders from risky lending.
[Frank] (5:37 - 5:38)
Of course.
[Kirsty] (5:38 - 6:03)
And so what they want to know is within a reasonable period of time, what are we going to be able to sell it for? And it's not like sell it under the best conditions. It's what can we sell it for quick and dirty to get us out of here, basically.
And that's where these difficulties come. I mean, we're seeing renovation quotes coming in $800,000, $900,000 at the moment. Things that you could build two houses for a few years ago.
And it's challenging because the market's pretty flat here at the moment.
[Frank] (6:03 - 6:34)
It's flipped, like, since COVID and it's like the world, the start of the world and now COVID. It's kind of like been this pivotal point. It's messed a lot of stuff up and construction has been terrible.
The cost of materials, the cost of labour has just gone through the roof. So everything is. And when you're doing renos or alterations, extensions, that double handling is part of that.
That cost is made exponential. It's extraordinary. You're almost better off building a new house, but people want to extend the house because they love the location.
[Carrie] (6:34 - 6:58)
We're really struggling with valuations on renovations or extensions at the moment. And I can think of two that come to mind that are very, very recent where the valuation on the property as complete hasn't even come up to the renovation cost. And so, you know, you're looking at lending a hundred percent of the value of the property or something or even more.
[Frank] (7:00 - 7:18)
That has to be pre-planned though, doesn't it? Like it's all well and good to come to us. Hey, we'll do a design for you.
Oh, we can, we reckon it's going to cost you, you know, $700,000. But they haven't actually checked how that works against the valuation and what the borrowing capacity. So again, they need to come and talk to you first, really, don't they?
[Kirsty] (7:18 - 7:46)
And then we get these issues that we didn't used to have in previous years, whereas builders would quote, and then they'd want to start in six months, 12 months. We'd have those longer lead times because the builders are now very worried about the increasing cost of things. Builders are ready to go so much quicker, but we still need to get the valuations done, the lending approved.
And, you know, if a builder takes, you know, say two months to provide you a quote, but wants to start in two weeks, those two things don't align.
[Frank] (7:46 - 7:51)
Oh, a hundred percent. And also every lending institution wants a fixed priced contract.
[Carrie] (7:51 - 7:53)
They absolutely do.
[Frank] (7:53 - 8:00)
Builders, it's tearing builders' hair out because, oh, I can fit you in in nine months time. I'm not going to give you a fixed price.
[Kirsty] (8:00 - 8:00)
Exactly.
[Frank] (8:00 - 8:04)
And why would you after the experience of how many builders have gone broke because they did do the fixed price?
[Kirsty] (8:05 - 8:28)
Correct. And it's just been so hard. And we've had not only the experience of some of the builders that our clients have been working with going broke, but also many of the builders issuing fixed price quotes and then coming back before we start and saying, that's no longer going to work.
So effectively we have to go back and do all that work again for clients and make sure that we're still with a lender where it works when there's an extra $50,000 or $100,000 on their cost base now.
[Frank] (8:28 - 8:33)
And to be fair, you'd rather them come in and tell you they're not going to be able to do it, than go broke halfway through the job.
[Kirsty] (8:33 - 8:36)
Yeah. It's been a nightmare for the clients to have that happen.
[Frank] (8:36 - 8:41)
Oh, it is. Because then the deterioration of the property during that period of time, everyone who gets involved.
[Kirsty] (8:42 - 8:45)
Just finding someone else to pick up and continue. What a nightmare. What a stressful nightmare.
[Frank] (8:45 - 8:56)
It is. And we've been involved in a few ourselves. We're trying to help them navigate from our perspective because all the licensing that's involved, and then who takes on what for liability.
[Carrie] (8:56 - 9:02)
And then lenders not wanting to fund anything that's partially complete. It's just a can of worms.
[Frank] (9:02 - 9:03)
Yep.
[Kirsty] (9:04 - 9:30)
Actually, on that note, can we do a public service announcement for anyone out there doing building? Because I feel like there's going to be so many people listening to this who are in that space. Every now and then we get a client who wants to jump the gun and get things started before all their finance approvals are in place and they want to do things like, say, maybe putting a slab down or something like that.
And logically, you would think that that would be quite helpful, but it actually can be a real nightmare.
[Frank] (9:30 - 9:32)
I actually did that.
[Kirsty] (9:32 - 9:33)
Oh, hi.
[Kirsty] (9:34 - 9:34)
How did that go?
[Frank] (9:38 - 9:44)
Caused a shit storm.
[Carrie]
Yes.
[Frank]
And delayed my project by another four months because of it.
[Kirsty] (9:45 - 9:55)
And you're not to know that. That's the thing. You would think that that's just...
I've got the cash to do the slab. I know what needs doing. Off we go.
But no, a bank will then say that as you start doing it.
[Frank] (9:55 - 10:06)
This came back where the lender came back because it was an investment property, said, no, we can't give you this loan that they were going to give me and left me high and dry. And then I missed my opportunity with the builder. And I looked like a total goose.
[Kirsty] (10:07 - 10:12)
Yep. And it's more common than you would think. And so, yes, anyone listening, no slabs, no starting.
[Frank] (10:13 - 10:15)
What about doing some landscaping?
[Carrie] (10:17 - 10:18)
Fencing's okay. Okay.
[Frank] (10:19 - 10:22)
Okay. Putting a driveway in. Put the power in.
[Kirsty] (10:23 - 10:47)
It's just one of those things that you don't even know it's an issue until it's an issue. I didn't as a broker know it was an issue until I had my first one crop up. And it actually wasn't even the client's fault.
The builder got excited and did it before the finance approval went through. And it was very, very lucky that we had a great relationship with that lender and we were able to talk them off the ledge because they were ready to walk.
[Frank] (10:47 - 10:54)
Yeah, it has to be clean cut. And, yeah, look, don't worry, I've learnt my lesson. But you just didn't think it would be an issue.
[Kirsty] (10:55 - 10:56)
You’d think it would be helpful.
[Frank] (10:56 - 10:58)
Oh, of course. Just get on with it.
[Kirsty] (10:58 - 11:16)
Those are all the fun things you learn when you start out being a broker. You know, I've had clients who said, oh, we've got our own valuation done. I was like, magnificent.
I shall send it on to the lender then. Well, the lender don't care about your valuations you've got done. All those great mistakes that we learnt and made at the beginning, things that seem logical but that just don't logically work.
[Frank] (11:16 - 11:36)
In our game as well. You know, I've got the soil test you gave. Look at that, it's 10 years old.
No good. You know, there's other things. Or they've done their own research, do this, and it doesn't work.
We have to go through a very set process to meet, you know, to get it through as quickly as possible. It's just doing... We keep talking about research.
[Amelia] (11:36 - 11:37)
We do every episode
[Frank] (11:37 - 11:51)
We should change the pod to, you know, building research to make sure you don't get caught. But it's no different for you guys. If people knew what you could do to help them at any stage before they got started, it'd make their life a lot easier.
[Kirsty] (11:52 - 11:52)
Exactly.
(11:52 - 11:56)
And there's so many things.
[Frank]
It makes my life a lot easier too because they come back, oh, can't get the finance, got to change the plans.
[Kirsty] (11:57 - 12:11)
Yeah. But these are all the fun parts that trip up your job and our job. I mean, things like high voltage overhead power lines.
[Carrie]
That's something I didn't know about before I started broking. They can cause so much trouble.
[Frank] (12:11 - 12:12)
Yeah, stay away.
[Kirsty] (12:12 - 12:17)
Just don't touch properties near them. Some will be OK if we're within 50 metres, 20 metres.
[Frank] (12:17 - 12:21)
We tell clients, don't go near them. It's just mad.
[Carrie] (12:21 - 12:40)
Yeah, it does limit your lending opportunities and which lenders will look at it. And back to loan to value ratio. A lender might say, look, we're happy to lend to that, but only up to 80% or only up to 70%.
Or the mortgage insurer, if you're in lenders' mortgage insurance territory, will be like, absolutely not. We can't touch that. So it’s things you learn along the way.
[Frank] (12:40 - 12:54)
I've got a question for you. What happens if you're looking at buying an existing property, you beauty, found something, looks awesome, you go through it, going through, getting your lending, borrowing capacity, it's all looking happy days, and then you find out there's a chunk of it that's never got a permit.
[Kirsty] (12:54 - 12:56)
That never happens. It happens all the time.
[Frank] (12:56 - 13:35)
Oh, I know.
[Carrie]
It happened to me this week.
[Frank]
Because we get engaged to fix them.
And that's so painful. That takes so much time. And there's a set process you've got to do.
And it's not. It takes longer to do that than go for a brand new application. And there's a lot of risk involved.
For you guys, when you know there's like back half of the house, and it might be just as simple as they got a planning permit, they got a building permit, but they never got a completion, which means it never got signed off. They didn't even get the occupancy. And they relied on the builder at the time to do it.
And they never got their plumbing checked and all that type of stuff. What do you do with you guys?
[Carrie] (13:36 - 13:47)
Quite often that actually comes to light well after we've already done our job. So if it's a purchase, for example, it comes up when the conveyancer’s is doing their searches.
[Frank] (13:47 - 13:48)
If they pick it up.
[Carrie] (13:49 - 14:30)
If they pick it up.
[Kirsty]
Sometimes it's picked up when a valuer goes through.
[Carrie]
Correct.
[Kirsty]
But a lot of the time we don't need to send valuers through property. So the banks are all out there doing their best to cut costs wherever possible. And so I'm going to guess and say probably half my valuations lately for purchases, the valuer does not need to go on site.
The bank spits out a report that says, do you know what? We're pretty happy with what you've paid for it. We've looked at what else is sold in the area, values in the street, what this property was worth for last time.
We're going to say no valuation needed. We're just happy with the contract of sale. So then if it's not picked up there, or if the conveyance doesn't pick it up and it all goes through, well then you've got clients that have inherited that problem.
[Frank] (14:30 - 14:32)
Which is the buyer beware law.
[Kirsty] (14:33 - 14:40)
That's it. And that's where you do want to conveyance. So that does really good searches.
You want a building inspector that's actually going to go through and do a good job.
[Frank] (14:41 - 14:44)
In my experience, they don't look at permits.
[Kirsty] (14:45 - 15:01)
Right. It depends on the level of detail that they're going to for sure. And there's good ones and there's ones that are less experienced for sure.
If it gets picked up though and the bank says that they've got an issue, I've had cases where it has to be rectified before settlement.
[Carrie]
I've had quite a few.
[Frank] (15:01 - 15:02)
Wow, that's hard.
[Carrie] (15:02 - 15:02)
Yeah.
[Frank] (15:02 - 15:04)
The timing involved in that is...
[Kirsty] (15:04 - 15:14)
Yeah. I've had cases where there's been some things and it's like the purchaser's like, I don't care, I want to accept it. And then there has to be...
[Frank] (15:14 - 15:14)
Careful what you wish for.
[Kirsty] (15:14 - 15:24)
Exactly. But there has to be an ability for the purchaser to show they have funds to rectify it after settlement.
[Frank] (15:24 - 15:25)
How do they actually know what it costs? They don't have a clue.
[Carrie] (15:25 - 15:39)
No, they don't. I've had instances where it's been picked up and then the current owners negotiate a lower purchase price to account for the fact that they'll need to go and get that done. There's different ways that we've dealt with it to come across.
[Frank] (15:40 - 15:51)
But that alone, no one actually knows until someone investigates. It could be a total demo job, you know, or it's just not worth fixing. And we've been involved in a few where we've said, not worth fixing, knock it down.
[Carrie] (15:52 - 15:52)
Really?
[Frank] (15:52 - 15:54)
Serious, because it's that bad.
[Carrie] (15:54 - 16:18)
And if you've inherited that problem as a purchaser unaware, that's crazy.
[Kirsty]
And that's why we're really careful not to give advice in those situations. That's where they need to get their legal advice and all that sort of stuff.
But we're sort of up against, I guess, a trickier situation is if the banks don't know about it but we know about it. That's where it can be really, really tricky and against it.
[Frank] (16:18 - 16:23)
Oh, 100%, because they're lending the money on something they think is all legit. Find out later it's not.
[Carrie] (16:23 - 16:30)
A question maybe for a conveyancer is whether or not title insurance would cover you for something like that.
[Frank] (16:30 - 16:55)
It usually does as long as it's not known. It's found afterwards, as I understand it. Yeah.
And sometimes some have done really well and you don't know. So we've been involved in one just recently and it's done incredibly well. And it just got found out by chance that they pulled out a bunch of walls and added a new bathroom and a few other bits and pieces, but they converted the garage into a granny flat.
[Carrie] (16:55 - 16:57)
Right,
[Kirsty]
which is so common.
[Frank] (16:58 - 17:47)
Well, yeah, and you can do quite a number. Like, to put a bathroom in, you don't necessarily need a permit for it except for plumbing, so that's okay. But there was a few other circumstances with it as well.
So it's buyer beware and making sure that getting your conveyancer, the inspector, but someone to go through the permits as well to see, well, there's no permit, there's nothing written down for this. And that's not easy. I'm just curious how the banks view that if they find out.
Because it's not valued, well, potentially not valued the same. But interesting, your insurance, they don't know. As far as they're aware, it's all legit.
Because insurance, because we've done some work for insurance companies where something never got a permit and they insured this and we had to rebuild it and said, we can't rebuild this, it's not legal. And they've said, well, we've insured it for a figure, here's the figure, make it work. So there's very different perspectives on these things.
[Kirsty] (17:48 - 17:52)
And like so many things, everything's all sunshine and rainbows until something goes wrong.
[Frank] (17:52 - 17:59)
Oh, totally. And when you've got the emotional attachment to that property, you've got your blinkers on, I still want this property.
[Kirsty] (17:59 - 18:02)
Right or wrong.
[Frank]
Right or wrong. Yes.
(18:02 - 18:05)
Think of the black mould in it, you'd still want to move in there.
[Kirsty] (18:05 - 18:13)
And that happens so much. Going back a couple of years when the market was just so hot and people were missing out. I've got a client miss out on over 20 properties.
[Frank] (18:13 - 18:13)
Yes, yes.
[Kirsty] (18:13 - 18:20)
Offer, after offer, after offer. In the end, they were just like, I'm offering 100 grand more than the asking price and I don't care.
[Frank] (18:20 - 18:30)
You lose your mind.
[Kirsty]
Yes, absolutely.
[Frank]
And this happened at GFC too, prior to the GFC.
It was going absolutely mental and people buying stuff without even seeing it, without inspections.
[Kirsty] (18:30 - 18:55)
Well, our market doubled then in an 18-month period. So the boom that we had sort of from 2016 onwards was amazing. But that 2003, 2004 boom that you're talking about there, I had just opened up my first real estate agency then and we were putting properties online and then overnight we would get three, four, five cash offers coming in from the mainland and it was just wild, like the prices that were coming through.
[Frank] (18:55 - 19:08)
I remember a guy I was working with and he was just shattered so many times coming to work, oh, I've got to put an offer in. Oh, it's already gone. It's already gone.
It's already gone. It was just devastating for people where they're all geared up to go.
[Kirsty] (19:08 - 19:43)
Tasmania's a funny old market. Our market booms are often driven by investors coming down here and going crazy and unfortunately for younger buyers entering the market, typically speaking, those investors might have a bit more room in their budget, a bit more room to push that bit harder and a bit longer and to go in with lesser terms than what a good mortgage broker might let a first-time buyer go in with. And the conditions are really important in that multiple offer situation.
[Carrie]
If you're going in with subject to sale or subject to finance and you've got someone else that's coming in with zero conditions on their contract, absolutely, you're going to take the more secure one.
[Frank] (19:43 - 19:47)
Of course you would and a lot easier for the real estate agent as well, isn't it?
[Carrie] (19:47 - 20:23)
The other thing we're seeing a little bit at the moment is when people are wanting to access equity in their house to say put in a new kitchen or put in a new bathroom or pull cash out to do some renovations. If they have paid a premium right at the peak over the last few years, there's no equity. There is no equity.
[Frank]
I didn't think of that.
[Kirsty]
Some people are in negative equity situations at the moment and so it's challenging.
[Carrie]
Particularly if someone has gone in well over the asking price in order to secure the property, then their property is likely well less now than what it was when they purchased it.
[Frank] (20:24 - 20:42)
Wasn't it interesting the last couple of years and it was the same, the GFC, where people go, everyone's talking about real estate, get sick of it, utterly sick of it, and they've got to buy, got to get into it and whatnot. And it doesn't matter how much more they had to pay for the property. I have to get in.
I'm going to miss out as if no more houses are going to be built.
[Kirsty] (20:42 - 21:08)
I think it's that fallacy that we tend to keep pushing in people's minds that property in Australia always goes up and it's completely untrue. There are many areas of Australia where property values have gone down. I've worked with lots of investors who've bought properties outside their known area and have had massive drops in them.
I don't know. When reason flies out the window and people just have to be doing something because everybody else is doing it.
[Frank] (21:08 - 21:12)
It's on the news feeds all the time. Everyone's talking about it.
[Kirsty] (21:12 - 21:23)
Bitcoin and things like that. When everybody else is doing it and when your person at the supermarket and up the road is giving you investment advice or property advice, maybe time to slow down a little.
[Frank] (21:24 - 21:24)
Everyone's an expert.
[Kirsty] (21:25 - 21:33)
Yeah. And again, it's like the debt that's easy to get. If it's really easy to get, it's probably not good for you.
And if something seems like it's too good to be true, it probably is.
[Frank] (21:34 - 21:40)
Yes. It's very interesting how we think sometimes and how we're influenced by what everyone else says.
[Speaker 1] (21:41 - 22:21)
Yeah and Carrie and I were talking about this the other day. She had a client come to her and go, are we doing okay? And it's so funny because the clients that typically ask that are usually doing fabulously.
It's the people that are running and chasing the Joneses up the street and driving the car with a massive lease and have all sorts of debt and it's really, really stressful for them. They think they're doing fabulously and they might look from the outside like they're doing fabulously. But the person who has a really solid grounding, has a lot of equity in their own home is, you know, looking after themselves with super if they're self-employed and all of those sorts of things.
They're the people that are, you know, actually probably winning more so than the people who look really flashy from the outside.
[Frank] (22:22 - 22:23)
You don't actually know, do you?
[Carrie] (22:23 - 22:26)
You don't know. No. Not at all.
[Kirsty]
Their mortgage broker knows.
[Frank] (22:27 - 22:34)
LAUGHTER Oh, wow. Now you've creeped me out.
[Carrie] (22:36 - 22:45)
LAUGHTER My husband often says to me, like, well, how come they can have that and how come they've got that and why have they got that? And you just sit there and go, oh, if only you knew.
[Frank] (22:45 - 22:51)
But that is so true. It is so true. It's all about the wants, isn't it?
[Amelia] (22:51 - 22:55)
And the aesthetic of it all, isn't it? Yes. To some degree.
[Frank] (22:55 - 22:57)
Yeah, I totally agree.
[Kirsty] (22:57 - 23:30)
Sometimes you would be surprised the people that are walking around town who look so normal. You know, it might be the tradie with the paint splattered shoes who's got three investment properties and has really set themselves up well. Or, you know, just people that you wouldn't assume that really, really have their stuff together from that sort of perspective. It's not usually the super, super flashy people
[Carrie]
driving around in their $150,000 cars.
[Kirsty]
Yep. But we like it when they give us lifts in them.
[Carrie] (23:30 - 23:30)
Yes.
[Amelia] (23:31 - 24:37)
LAUGHTER So what about variable versus fixed interest rates? That's a big one, I guess. A lot of people go variable, but are there benefits to doing fixed?
[Carrie]
This one's a really tricky one because it comes down to your individual circumstances, your risk profile. Yeah, typically a variable rate is something that you can either utilise a redraw facility or an offset facility so that you can pay down that debt faster. That would be more typical for someone who would like to be able to pay down as much as they can off the property at the time.
A fixed rate can provide a lot of comfort. However, if someone is kind of borrowing close to their maximum borrowing capacity and they really want to be able to have the certainty of repayments for a period of time.
[Kirsty]
Yeah, it's like an insurance policy, isn't it?
[Carrie]
Yeah, that you know for two years this is exactly what my payment is going to be.
[Kirsty]
And if the market rates go up, I'm protected. But if the market rates go down, I'm stuck with it. Yeah, you've got to be happy to be stuck with it, whatever it is.
[Frank] (24:37 - 24:38)
They used to do split ones, didn't they?
[Carrie] (24:39 - 24:39)
They still do.
[Frank] (24:39 - 24:40)
They still do?
[Carrie] (24:40 - 24:51)
Yeah. And we did a lot of those when rates were low. We did a lot of split loans.
[Kirsty]
When you could get fixed rates that started with a one. That was amazing.
[Amelia] (24:51 - 24:52)
Oh, I had that for two years.
[Carrie] (24:52 - 24:55)
1.79 was the lowest I ever got someone locked in.
[Frank] (24:55 - 24:56)
Are you serious?
[Kirsty] (24:56 - 25:23)
That was amazing. Yes, yes.
[Carrie]
And actually there's one client that wanted to fix for five years at a rate of, what was it, it was like 2.99. And I said, oh, that's a long time to lock for. Are you sure that you're comfortable locking in for that? Because, you know, at the time we could have got a three-year for 1.89. No, no, this is what I want to do. And that client's still my client today and we always have a giggle because they've still got another couple of years.
[Frank] (25:25 - 25:27)
Do they have a crystal ball?
[Carrie] (25:27 - 25:45)
I wonder. I often ask them.
[Kirsty]
But, again, that's part of our job is making sure that that client knows that two years from now that interest rate's going to fall off and be more than double that and be ready for it because we've got a lot of clients at the moment who are coming off these super, super low interest rates and they're not ready for it.
[Frank] (25:45 - 26:02)
Yeah, and I hear that in the news too. People are, yep, I just can't service the loan anymore.
[Kirsty]
Yeah.
[Frank]
And I remember talking to people about it. It says, well, it's great now, but can you handle a 3% rise? You've got to be mentally prepared that you're going to sacrifice something because it's bullshit that it'll never go up.
[Kirsty] (26:03 - 26:09)
Yeah. I mean, really, the mid-rate for most interest rates in Australia sits around that sort of 7% mark.
[Frank] (26:09 - 26:11)
Oh, I remember my first one was 9%.
[Kirsty] (26:11 - 26:14)
Yeah. And I read an interesting stat.
[Frank] (26:14 - 26:15)
I think I'm showing my age there.
[Kirsty] (26:16 - 26:40)
I read an interesting stat a while ago that said that something like 60% of the time people with variable home loan rates are actually better off. So it's not a guarantee, but if you do have that capacity to pay extra, variable's probably the way to go. If you know that you've got some maternity leave coming up and you know you've got these fixed interests and you're very, very concerned about interest rates going up, well, then fixing might be the right option for you.
[Frank] (26:40 - 26:43)
Or splitting it so you can pay more off.
[Kirsty]
Exactly, yes.
[Carrie] (26:43 - 27:27)
And this comes back to Kirsty's earlier comment of if you're able to pay any extra into the loan, how much it saves you over the life of the loan. So with a fixed interest rate, typically you're limited to how much extra you can pay into that loan, and with a variable rate, it's unlimited. So if you look at your budget and you think, well, hang on, I'm going to actually try and put that extra $50 a week in so I can pay my home loan off seven years earlier, for example, and save $50,000 in interest, just random figures off the top of my head, then of course variable's going to be a good way to go.
But it's just understanding that you haven't got that protection around future rate rises. However, you've also got, if rates do drop, you've got the advantage there as well.
[Kirsty]
It's not a one-size-fits-all sort of...
[Frank] (27:27 - 27:35)
Because everyone's circumstances are different, the property's different. And when you go into investment properties, it's a different beast altogether.
[Amelia] (27:36 - 28:00)
Investment loans. There's so many different loans. You know, you've got investment loans, construction loans, vacant land loans, and they're all...
[Kirsty]
Commercial loans, business loans, asset finance, bridging loans. Carrie and I both just take a little internal shudder. We don't love bridging loans.
We do have someone on our team who seems to quite love them, but those are more of the stressful ones. Anything where there's people selling and buying in really close succession can make things more challenging.
[Frank] (28:00 - 28:05)
Or building, then selling. You just don't know how the market's going to go by the end of your build. That's the risk.
[Kirsty] (28:05 - 28:13)
Yeah. Or they sell first and then they're homeless during their build, which is always fun. Or living with family while their build is taking...
[Frank] (28:13 - 28:14)
Don't go there.
[Amelia] (28:14 - 28:17)
Longer.
[Kirsty]
Oh, always longer. Yeah. Yeah.
[Frank] (28:17 - 28:18)
Nothing goes to plan.
[Kirsty] (28:19 - 28:19)
No.
[Frank] (28:19 - 28:20)
Especially with construction.
[Kirsty] (28:20 - 28:22)
It's part of the adventure though, isn't it?
[Frank] (28:22 - 28:24)
Oh. gee. You put that nicely.
[Kirsty] (28:24 - 28:46)
I say to my clients who build, I say you're going to have a more stressful time than someone who goes out and buys an off-the-shelf product that's already been built for you. So you'll have a few more grey hairs like me by the end of it, but on the whole, I think the clients that build, gosh, they're so proud of what they've been able to do. They're so happy with that product at the end.
[Carrie]
They tend to just love their home because they've been so invested in the design It is.
[Frank] (28:46 - 28:57)
It's this massive emotion. And we tell people to be well-planned, well-prepared during that period. And whatever you do, don't make a change.
[Kirsty] (28:58 - 29:15)
Yeah. Variations are the enemy. It's so funny though.
I've been advising my clients that for years and I did a renovation last year. And I was like, uh-oh, I think I need six more PowerPoints. It wasn't a huge variation, but I had a couple like that.
[Frank] (29:15 - 29:17)
It's like when you change the bathroom.
[Frank] (29:17 - 29:18)
Oh, I love that tile.
[Frank] (29:20 - 29:36)
And you have to change it to that tile. Bang, there's another four grand worth of tiles. And it costs twice as much delay because they're complicated.
And that's what people don't realise. I'm looking at these kick-ass European windows that go into the house I'm going to build. It costs four times more to install them.
[Kirsty] (29:36 - 29:53)
It's just crazy, isn't it? And that's the thing when we're doing construction loans, builds, renovations, anything like that. We always want to have money for overruns.
We always want to have that in there. And if the valuation doesn't come up to scratch, that's where it's really, really pinchy for people as well. Yeah.
[Frank] (29:53 - 29:59)
We always believe you should, for new builds anyway, about 5% contingency built in because you don’t know the variability onsite.
[Carrie]
Most people do not have that, that’s the reality.
[Frank]
It blows my mind, its always been a thing of having a contingency. Renovations you need 10-15 because you don’t know what crap you’re going to find. I remember I did my very first one, they used extension cords for the wiring.
[Kirsty]
Wow! I needed underpinning on mine.
[Frank]
Awww Nice! And then what else was it? The found the galvo pipes were pretty well stuffed so I had to redo all of that as well. And then my budget just got shattered.
[Kirsty]
Yeah.
[Frank]
And I was scrambling
[Kirsty]
Those old houses, there’s stories to tell
[Frank]
But I didn’t do a loan, I had already saved the money and budgeted and ohhh where am I going to get the money from?
[Kirsty]
Yeah.
[Carrie]
I had this exact conversation with some clients of mine that were wanting, this was yesterday, that were just wanting to do some small cosmetic updates and they said we absolutely will not need anymore than sixty thousand to do what I want and I said…
[Kirsty]
Get a hundred
[Carrie]
I said look I’m going to sound like a weird mortgage broker here that’s just trying to get you to lend more money but if there’s anything I can tell you, don’t go the sixty, pull the hundred out you’ve got the borrowing capacity, you’ve got the equity, once the renovations are finished we can always reduce that loan limit back down which will then reduce your minimum repayment back down but it is going to be a lot easier to do that now than to try and have to do that mid renovation to try and go and get an increase in that extra lending. It is the best bit of advice I can give you. So yeah.
[Frank] (31.24)
We’ve been involved in hundreds of reno’s for people, they’ve said can you come round and have a look at this, found there’s a floor that’s rotted, or a box gutter that’s failed and you’ve got black mould in behind the wall, you’ve gotta strip the frame out and clean the whole thing up. Just on that one we actually ripped the whole roof off…
[Carrie]
Right.
[Frank]
Because the thing was going to keep leaking and causing problems, And I love box gutters…not! And we ended up just ripping the whole roof off and put a whole new roof on so they never have a problem again. They had the capacity, you don’t know what you find behind the plaster, underneath carpet, under the floors.
[Kirsty]
And sometimes it’s great that you’ve dome the renovation because otherwise you wouldn’t have found these things and you would have just kept living with them. But once you know, you know. You gotta fix it. And banks don’t want to be funding things that are half started.
[Carrie]
Exactly, if you have a valuer to top up the loan for more money and there is no plaster, they probably aren’t going to lend you more money at that point.
[Frank]
Really? Ok. And we’ll go onto the next favourite subject for lenders, owner builders.
[Carrie]
Ok.
[Frank]
I had to throw that one in.
[Amelia]
We have had a podcast on this already.
[Frank]
I know, but from a…it’s massive
[Kirsty]
It has changed so much in the 10 years since we’ve had Uploans.
[Carrie]
Yes.
[Frank]
Cos I’ve done it myself. That’s how I built my first house.
[Carrie]
There aren’t many lenders left that will allow you to do it. There’s quite a few work arounds depending on your situation, but yeah it’s a really tricky space to be in at the moment.
[Kirsty]
Most of the lenders have pulled out of that space, and righly so, probably not for people like yourself that are in the industry who have a really good understanding
[Frank]
No, I won’t do it again, I’m scarred.
[Kirsty] (32.56)
But the lenders will…almost everyone that goes through the process is scarred and the lenders aren’t really pulling out of this space because say your builder wants to build his own house, they’re pulling out of it because numpty’s like me who can’t hammer a nail straight thought it was a great idea to go and do an owner build and then they didn’t finish their houses. And so there are so many houses out there that are half finished, there are so many that are hodge podge together on personal loans and credit cards and it’s just massive, massive risk for the bank.
[Frank]
Or they’ve got a new boat in the driveway because they gave him all this cash. I actually saw it on a commercial project recently.
[Carrie]
Really?
[Frank]
Yep. And the client…there’s money missing.
[Carrie]
Right.
[Frank]
And I get it why banks are hesitant to do that and to have clear contracts. And I totally get it because it’s their money, their risk. And if they can’t get that money back
[Kirsty]
And we have probably have three good lenders still in that space, it’s not something that we love to do a lot of and really, it’s mostly now a product for builders who wany to do their own builds, not for someone who wants to arrange all the trades themselves and work with all the contractors who isn’t in that space. There’s just too many hurdles to jump through, it’s just too challenging.
[Frank] (34.12)
And the other side of it is that it’s too ambitious because they, again they don’t know what they’re talking about. A lot of owner builders have not done a thing. They haven’t even built a deck or anything like that. And they haven’t got a clue how this stuff goes together and trying to control all your contractors, cut corners, make changes, the changes like the ones we’ve been involved with, it’s astronomical some of the changes and they’re already complicated builds
[Carrie] (34.33)
Correct. But even trying to get the right trades people in the right order, cos I’ve heard of people just walking off site because they’ve come in to do the flooring for example and there’s still someone in there fitting cabinetry and it’s just, you know, it just sends up a debacle.
[Frank]
It is.
[Kirsty]
Nothing a few shipping containers on the site can’t fix. You know there was that time period where everyone was going to be doing everything with shipping containers as well and
[Frank]
Don’t get me started on that.
[Kirsty]
No, no I mean anything wild, weird and unusual the banks going to have issues with valuation
[Frank]
Of course they are.
[Kirsty]
The banks want to see what else has sold in the area like this so that we can feel comfortable if you go down the toilet where we’re going to get our money back and so the weirder and wilder and more wonderful that they are the harder it is.
[Frank] (35.21)
Of course it is and it makes perfect sense
[Kirsty]
That saying I have funded yurts before.
[Amelia]
Oh wow
[Frank]
Seriously?
[Carrie]
Why do I not know that story? Why are you holding back on me?
[Frank]
Having a yurt to live in or having a yurt to live in or just having a yurt generally?
[Kirsty]
No, it was sort of the primary accommodation on there,
[Frank]
Was this for commercial accommodation?
[Kirsty]
No, No
[Frank]
What?
[Kirsty]
Yes, Yes
[Frank]
How’d you get that through?
[Kirsty]
Equity, equity. Equity is always the answer.
[Frank]
There’s no yurt in the building code.
[Kirsty]
No, no so sometimes we do wild and weird and wonderful to make people’s dreams happen but again I’d probably, I probably would say no to yurts in future.
[Frank]
A dream of living in yurt
[Amelia]
Wow.
[Frank]
It’s like me dreaming about having my own bakery and distillery together.
[Carrie]
Ooh I’m on board
[Kirsty]
Put that next to Carrie’s and my book shop and breakfast place and maybe a wine bar.
[Carrie]
We will one day have a book shop and a wine bar
[Frank]
Oh yeah
[Kirsty]
We’ll never leave
[Frank]
Oh yeah that sounds awesome.
[Amelia]
Alright we might start wrapping up
[Frank]
It’s going downhill isn’t it?
[Kirsty]
We’re just getting to the good stuff
[Amelia]
It’s going very downhill,
[Kirsty]
It started with the yurt.
[Amelia]
I’m going to have a lot of fun editing this one, that’s for sure, I want to talk about the takeaways and Carrie and Kirsty I want to ask both of you separately what are the take home points and advice you would give anyone who is looking to do any sort of borrowing through the banks?
[Carrie]
I would say find a mortgage broker who you’re really comfortable with and start the process as early on as you can. It’s nothing more stressful than when someone comes to us with a contract they’ve got 14 days for finance and we’re starting from scratch. That would be my biggest suggestion is to just get in front of a mortgage broker before you start making any decisions.
[Kirsty]
I would definitely agree with that and then from a personal perspective I would say to people, be boring come to us with you know…
[Carrie]
You’re so inspiring Kirsty!
[Kirsty]
As little debt as possible, honestly I don’t want to have…
[Frank]
Boring? You just approved a yurt!
[Kirsty]
Do you what? And I love the people that did the yurts but that’s not boring, come with savings, and limited personal debt, great jobs or you know self employed history. You don’t need to be super exciting. I don’t care how much you have in Bit Coin, I don’t care about your afterpay limit that you pay off every month in full, just come with the basics, like you know, people sometimes apologise for being so boring and I’m like no you are the dream here, living the dream so yeah I wouldn’t be striving to be too exciting and all of that especially when you’re making those first steps into getting finance. You want to show a bank you can pay off a home loan and the best way to do that is to have savings in the bank.
[Frank]
My dreams to do a strawbale home.
[Carrie]
Oh my lord! Can I add onto that though the other thing and I get what you’re saying there Kirsty, but um if you’re someone that has sort of bad credit history or had bad credit history or doesn’t have a savings amount and really want to get in front and don’t know where to start, I’d also say don’t be embarrassed. I don’t think you understand that the things over the last ten years of doing this that we have seen, nothing is going to surprise us, right, so if you are someone that isn’t boring.
[Kirsty]
If you’re not boring and would like to be boring.
[Carrie]
We will help you be boring.
[Kirsty]
But that is so true
[Frank]
I’ve never heard of making people boring.
[Kirsty]
But I mean I guess, what Carrie’s talking about there, that level of embarrassment sometimes people do have in going to see a broker, it is like having your underwear on display. We get to look at everything and that’s really, really challenging and what a lot of people don’t know about my situation is that I had parents that went bankrupted when I was a teenager, I’ve been through the trickier sides of it of clients that have gone bankrupted, I think you have as well. We have seen it all and we helped people come out the other side with their homes, with good credit, with all of that sort of stuff, there’s nothing to be embarrassed about in coming to see us, we’ve seen everything and we just want to help.
[Frank]
Love it. So good
[Amelia]
Well that’s probably the first time I’ve ever had a take home point as be boring.
[Carrie]
I think Kirsty should speak for herself.
[Amelia]
Well I think that’s a great place to wrap up right there, be boring everyone and thank you so much Kirsty and Carrie from Uploans, it’s been amazing having you guys come in and giving everyone some insight as to what you guys do and how the banks can help you with lending and how you guys can help with lending. So thank you so much for coming in we do really appreciate it
[Carrie]
Our pleasure.
[Kirsty]
Thank you for having us.
[Frank]
Thanks very much guys that was awesome.
[Amelia]
And thanks again Frank, we’re going to have to start a new slogan of don’t be boring or be boring!
[Frank]
Be boring! There’s no fun in that
[Amelia]
To get in contact with Uploans you can visit their website uploans.com.au or you can find them on Facebook or Instagram for more information and all of their contact details. Ok, thanks for listening to the Building Design, Prime Time Podcast, we’ll catch you next time.
[Frank]
Catch ya’s
[OUTRO]
You’re listening to the Building Design, Prime Time Podcast.
