Our home buying questions answered | Andre Botes, ubank

Bryce: [00:00:31] Welcome back to another episode of Get Started Investing, a podcast where we attempt to answer the most common money and investing questions that come from our community. If you're just joining us for the very first time, a massive welcome, we strongly recommend that you scroll up and start at episode one. Now, while we are licensed, we are not aware of your personal circumstances. So any information on this show is for entertainment and education purposes only. Any advice is general advice. But with that said, my name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you? 

Alec: [00:01:01] I'm very good, Bryce. Very excited for this episode. We've spoken a few times on the podcast that we are in the midst of our homebuying journey, and after years of doing the podcast on share investing and stock market with dipping our toes into the property water.

Bryce: [00:01:16] We are.

Alec: [00:01:17] And luckily we have this privileged position where we can get experts on the podcast and ask all of our dumb property questions. And we've got an expert in the studio today and we are going to pepper him with some of the dumbest property questions we can think of. 

Bryce: [00:01:32] Yes, it's a whole new experience, plenty of questions that we have, and I'm sure those that are also on their property journey will or even if you're thinking about getting on the property journey, we're going to cover a lot of ground in today's episode. So it is an absolute pleasure to welcome to the studio, Andre Botes. Andre, welcome.

Andre: [00:01:48] Hi, Alec. Hi, Bryce. Thanks for having me on the show. 

Bryce: [00:01:50] So Andre is head of digital product and Partnerships for Home Loans at Ubank. And we're going to unpack everything Home loan related. 

Alec: [00:01:59] Well, Andre, let's start at the beginning. And I think when a lot of people think about housing, the conversation starts with price. And so, you know, we're all aware of how expensive houses can feel at the moment. So for first home buyers like Bryce and I, how do we go about determining how much we can afford when we start looking at house prices? 

Andre: [00:02:20] That's a great question, Alec. Thanks for asking. That's one of the things I want to start with is there's quite a few ways to come at this and it all really depends on the stage in the journey you're at. So you might be just starting thinking about buying a property and you're very interested in knowing roughly what you can afford. And there is a tool at your bank dot com to a you called a borrowing power calculator. And what a borrowing calculator is, is it something that lets you put in your income, your expenses and a few other bits and pieces of information about you dependents and so on and so forth, and it will give you an estimate how much can you afford to borrow? But the borrowing calculator does a little bit more than that. It actually shows you things like what your repayments on that amount would be and what deposit you would need to come up with. So you sort of need to look at all three of those things together to work out what you can afford, ideally before you fall in love with a property so that you know what to look for before you start making offers on properties. So the key answer is start with a borrowing power calculator. There are two other ways to do it, the more serious you get. So one of the things you can also do is you can do what's called a pre-approval, so you can actually apply for a home loan and that is a little bit more detailed. You provide a lot more information to get that, but you will get a pre-approval offer from a bank up to a certain amount that will tell you what you're able to borrow. And the last method you can use is actually speaking to a broker. So a broker will take you through a combination of either of both of those things a borrowing power calculator in the first instance, or they'll do a pre-approval for you just depending on how quickly you want to move and what you want to find out at that stage. 

Bryce: [00:03:50] So with the calculators, Andre, one of the things that I have also found useful is reversing it and somewhat putting it, and this is what I'm prepared to pay from a cash flow point of view each month, and then it'll spit out what that would equate to in a in a mortgage. Say what's your maximum borrowing capacity. 

Andre: [00:04:07] That's excellent. And actually I'll share my experience because I recently bought a property and I did exactly what you were describing. So when I thought about what I could afford to pay, it wasn't how much I could borrow from the bank and trying to get the maximum amount of money. For me, it was about how much I could afford and for me what I could afford looked like. What was I paying in rent at the time? What would my strata fees be? What was I saving towards a property? And that was my outgoings on a monthly basis. And I was able to use the calculator and some sliders to go, Well, hang on a minute. If I wanted to keep that same outgoings and maintain the lifestyle I had, I could actually drag the slider up and down and work out well. Actually, for this amount of loan, I can basically have the same sort of lifestyle I have today. So it's very versatile. It lets you do that from multiple angles.

Alec: [00:04:49] Yeah, I think a lot of people do that and start with how much they want to pay and then it very quickly becomes how much they can afford to pay. 

Andre: [00:04:55] It's actually specifically in the Sydney market. Sure. 

Alec: [00:04:58] So I think the, the one thing that I'm still trying to get my head around is what costs are covered when you're looking at like a mortgage and it's like what costs are covered and then what are the additional costs on top of that that you're going to have to stump up for? So, you know, things like stamp duty, legal fees, building inspection report, pest inspections. Yeah, mortgage insurance, mortgage insurance, not some of those. Maybe not all of them get rolled in to the mortgage. Maybe none of them do. I don't know. That's why I'm asking. Yeah, but. How much do you then budget on top of the mortgage repayments and the mortgage amount to the additional cost? [00:05:34][36.3]

Andre: [00:05:35] Yes, So that's a great one. A lot of borrowing power calculators don't have all of that included in the calculation. And by all of that, I'll try and pick some of the examples you chose. So, for example, lenders, mortgage insurance is probably one that's not included, and that's because that's something that really depends on how much of a deposit you're putting down on the property. And we'll talk about that in a little bit. Things like stamp duty. Again, some people are eligible for first time buyers sort of grants so they wouldn't be included. Strata fees are different in every single property, so you typically would need to go, well, what is that repayment? And then you would look at the other stuff separately. And some of those are what you would call your upfront costs as part of the deposit. So we know stamp duty is payable upfront. So that's a part of the lump sum as part of the deposit that you need to consider, as are legal fees. So settlement and conveyancing costs and those sorts of things. Whereas your things like a strata fees and your council tax and the water bills and all of that will becoming quarterly or annually, so they become more of your run expense more than an upfront expense. 

Bryce: [00:06:36] Strata is a classic like you look at there the listing price on real estate or whatever, and you just or I often forget about the strata and you kind of like I can afford this and then like 600 bucks a quarter or whatever and you just like see repayment is actually that plus strata and it can. It can be make or break in some situations.

Andre: [00:06:54] Yeah, absolutely. And one of the things we'll talk about is, you know, people need to look, particularly if you're buying a strong a property at what those annual costs are and probably also make an allowance for potential special levies because there is the $600 a month which is the admin sort of levy, the regular amount that you're used to sort of being charged. But every now and again, if there's a major refurbishment or renovation style expense, that can be a special levy that you need to budget for too. 

Bryce: [00:07:19] Now you mentioned pre-approval is one of the ways in which you can get an understanding of how much you can borrow. Yeah. So what is the process of applying for that and then what's the benefit of having that when searching for a property? 

Andre: [00:07:33] Yeah, so I'll cover the process first and then we'll go into the benefits. So the process depends on the way and who you're applying through. So at Ubank we have an online process, so you literally go to your bank dot com to a, you go to the home loan section and you can start an application for a home loan. Now this is when you're really serious, you actually want to go out and make offers on property. So you've gone through the borrowing power sort of calculator stage. You know how much you want to borrow, but you want to know that you can actually make offers on properties and know that the bank will give you that loan. So the process basically is you apply online and it does quite a few things. So it's a lot of information you need to provide. So we will verify your income, will verify your expenses, your assets and liabilities. And we do that electronically through screen scraping and looking at your bank statements and categorising that all for you so you don't have to type that all out yourself. We will do things like a credit check, will verify your ID, and then we'll give you the offer. And that sounds like a lot of effort, but it's actually quite important because what it does, if you do that all upfront, you get what's called a fully verified pre-approval, which is exactly what you want. Because when you go and make an offer on a property, you don't want to go to the bank and say, okay, I found the property and now suddenly the bank give you the loan because they didn't check this expense or your income and all that sort of stuff. So if you're going to be borrowing 500,000, $2 million, you pretty much want to know that when you've made the offer and your deposit is at stake, that you are going to get that money from the bank through the approval process. 

Alec: [00:08:56] To speak to my personal experience, there will often be surprises in the like that that initial thing that you can then sort out. But and it's much better to do it before you've gone to an auction and put a bid on it. Yeah, scrambling to do it. There's a few things that I hear around, things that you can do to maximise your borrowing capacity. And like the classic one is like cancel your credit cards and that kind of debt. Yes, that can have an outsized effect on the amount that you can borrow. Any other tips and tricks if people are in that? I'm about to go for a pre-approval stage. How do I maximise what I can borrow? 

Andre: [00:09:30] Yeah. So cards and credit cards is one of the big ones, particularly if they're not used. So I had that situation where I had two credit cards with no balance on them, but the bank took that into account and how much they were prepared to lend me. And you know, other things that you can do is, you know, I would say make sure that you know what your expenses are when you make the application, because you can go into a borrowing power calculator and you can think you only spend $1,000 a month on food and gym memberships and Netflix and all those wonderful things and get a bit of a surprise and find out it's actually $2,000 when you go through your bank statements. So I think just going into 3 to 6 months before you're doing a full application of what your real living expenses are. So you've got realistic expectations. I wouldn't try and hijack a process to try and increase your borrowing power because you want to make sure when you move into the property it's affordable, but you could absolutely afford to not have credit cards you don't use and that will help with your borrowing power. 

Bryce: [00:10:23] So I'd be interested to know your experience with how long between your first period. And buying your first home, but I think I'm up to my third. Like renewal of the preapproval.

Alec: [00:10:36] How long do prior approvals last?

Bryce: [00:10:38] I think you get an initial 90 days, and then it's a kind of tick of a box to then flick it over. Okay. And then at the end of the 90, it's a full reapplication. Is that right? 

Andre: [00:10:49] Absolutely right.

Alec: [00:10:50] So you've had 270 days over?

Bryce: [00:10:53] Yeah. End of last year.

Andre: [00:10:56] Yeah. This is where it's going to be. Quite embarrassing. So I have been searching for property for a good couple of years, so I had to do that renewal multiple times. And that was nothing to do with the loan and everything to do with trying to find a property in Sydney that I could afford. Yeah, which I'm sure you guys. Fully understand what I mean when I say that. 

Alec: [00:11:12] It's somewhat reassuring that someone that works in the home loan space is still dealing with the issues that we all have. 

Andre: [00:11:19] I am human, just as everyone else.

Bryce: [00:11:22] Yes. And I'm assuming the reapplying doesn't affect your credit score. It doesn't affect what you can borrow, but your circumstances might change in that six months where they will reassess where you're currently at, but it doesn't impact you negatively.

Andre: [00:11:37] And it's not a negative impact. Absolutely right. 

Alec: [00:11:39] Does it does it cost anything? 

Andre: [00:11:41] It doesn't cost you anything to to do the assessment itself. In actual fact, I contacted one of the credit agencies just to sort of validate some of this information. And getting sort of a mortgage application process on your record can actually sometimes be positive for you. So I'm not saying you do that to get a positive score, but people assume that's a negative impact and actually it could be quite positive in that instance. 

Alec: [00:12:04] Now, Andre, we have a policy here at Equity Mates. We have three official policies. We hate paperwork, we hate fees. But most of all, we hate jargon. And the stock market is just full of jargon that puts people off and confuses people. And as we get into the world of home loans, I don't think it is is as bad. But there's certainly some jargon that it would be good to clarify. Offset and redraw. I've kind of got my head around offset, but I would love for you to explain that LVR, LMI which touched on earlier comparison. Right. I'll stop throwing jargon inside explaining some of them maybe. Let's clarify and let's start with offset and redraw because they're pretty important.

Andre: [00:12:48] Yeah, that's a great question and good point about the jargon. So I will try and simplify it as best I can because they are quite complicated things to take out or try and take advantage of. So with offsets and redraw, one of the things that you need to know about both of them is that they help you reduce the amount of interest you pay on the loan. They just come at it in different ways. And which one works for you really depends on your circumstances. So what I'm about to say isn't actually a recommendation for one or the other. It's just a you know how it works. And then you know what questions to ask a tax adviser some things. So first and foremost, what happens with home loans and the way that they charge interest is they accrue interest on a daily basis and typically charge you that monthly. And what happens is when you pay money off the loan. So in the case of a redraw and I'm going to use an example here just to help with the understanding of this, you might have a $100,000 loan and you might pay $5,000 into that loan. So you now have a $95,000 loan that you could potentially redraw that $5,000 back out of the advantages. Once you've done that, you're only paying interest on the $95,000. You can achieve the same thing with an offset. So you can have $100,000 loan, you can put $5,000 now in a separate account and then also just typically a separate account. And it also reverses out the interest you would pay. So you're still paying interest on the equivalent of a $95,000 loan. So that's how they both the same in. As far as reducing your interest is concerned, then they start to get a bit different. So you then need to start making choices around which one is right for you. At Ubank, for example, we allow you to have multiple offsets, and that's quite interesting for people who manage the money in different ways because I might be saving for a deposit for my next property, for example, a holiday, a car, and I keep them in separate buckets. So rather than putting them into a redraw accounts and sort of trying to keep track of all of that, I can have multiple offsets and figure out how to, you know, how much I've saved up for each of those. So an offset for me makes a lot of sense. A redraw also makes a lot of sense for me, and I use both, by the way, to prepare for those things like special levies that I talked about. So if I pay a little bit extra on the loan each month, then I know that if there is a nasty surprise somewhere down the line, I've got the money I can take out the redraw to use on the property. So advantages are literally they both help you reduce interest. One is a little bit more expensive but much more flexible than the other. So the offset is much more flexible and then it starts to get interesting from a tax perspective. So one of the things if you're an investor, for example, they don't like to pay all the money off the loan because the interest is tax deductible. So they wouldn't wouldn't want to use a residual, for example. And then you go, That's great. I'm not an investor, I'm buying a property. But then you need to start thinking long term. So are you buying a property that you're going to grow out of and ultimately rent out when you purchase the next property? And if that's the case, does the outstanding loan? It converted to an investor loan. And do you want it to be tax deductible? And if all those things are true, then you need to talk to your tax advisor to go. Which one should you use? Should you use the redraw? Should you use the offset? Ultimately, they're both tools and which ones you use really depend on your circumstances, your outlook and what you want to achieve. But at Ubank, we actually have products, a very flexible product, by the way, that gives you both. So you can actually use all of those features the way that suits you and that can change over time as well along the way. 

Alec: [00:16:01] All right. Let's do a quick fire jargon, because we could get bogged down in all of them.

Andre: [00:16:06] Yeah, absolutely.

Alec: [00:16:07] LVR. 

Andre: [00:16:08] LVR. So LVR stands for loan to value ratio. So we'll use another example. You're buying a property in Sydney and you know, Sydney property prices are expensive, so that's probably closer to the million dollar mark if you have a deposit and let's just say it's a $200,000 deposit and you pay that off the loan, so you've only got an $800,000 loan, you divide the $800,000 by the million dollar property value and it's an 80% loan to value ratio. Yeah. Now why does that matter? Who cares? And it matters because the higher your living are typically the higher your interest rate is. And also when you start getting over 80% LVR products, you start to pay what's called lender's mortgage insurance or LMI, which is another jargon term I'll come back to. So typically coming back to LVR are people will try and get lower alluvial properties or lower alluvial loans. So the closer you get to, say a 60% LDL loan, the cheaper your interest rate is, the quicker you can repay it if you keep your repayments. The same at Ubank, we sort of have 85% no LMI product to help first time buyers get into the property market without paying the lender's mortgage insurance premium. But we also offer, you know, products with 80% and 60% of our pricing. So it really helps as you sort of mature through paying down your loan, reducing your interest and paying it back faster. Coming back to the alarming point, so what typically happens if you've got a loan above 80% in most cases, you will need to pay what's called lender's mortgage insurance and it is exactly what it says on the tin. So you literally pay an insurance to protect the lender if you're unable to repay your mortgage and the property ultimately isn't able to be realised of its value. So there's a loss on that property. It sort of insures the lender. That's what lenders mortgage insurance is. 

Bryce: [00:17:51] Something I learnt on our journey of getting a mortgage and I'm not sure if Ubank do it or if it's just across the industry. But there are also particular careers that can void Elmo like doctors and lawyers. Yeah, like if you're a doctor or a lawyer, I don't know what other careers are out there, but the bank kind of says that's such a I guess it's a safety thing. Yes.

Bryce: [00:18:14] Going to earn enough money. I don't know.

Alec: [00:18:17] What the cost is or. 

Andre: [00:18:23] I'm aware of what you're speaking of. There are some lenders from time to time that do offers, for example. So they will charge like a, you know, a nominal fee for LMI or waive it for particular careers and all that, as you say. But, but that will be very lender specific. It's not something that everyone in the industry does and every lender does. It's just an offer that comes up from time to time. 

Alec: [00:18:42] One more point of jargon, comparison rate comparison sites in home loan ads, what are they and why do we care? 

Andre: [00:18:49] That's a great one. So what a comparison rate is. It's a good way to try and figure out which loan you may think is better than another loan. And I say may think because there's a little bit more to it and I'll explain it as best I can. So essentially it's a standardised formula that says if you've got a loan and it's got this amount of interest and this much fees, how does that compare to the next product that might have no fees but a higher interest rate or a lower interest rate because of face value? You might look at a loan and think, Well, that's got the lowest interest rate, that's the best loan for me, and then find out because of the fees, actually it's more expensive or it gets even more complicated If it starts off as a fixed rate loan, the fixed rate percentage of interest might be really, really low. But when it reverts back to a variable rate it is actually a lot higher. So the comparison rate helps you try and remove all of that noise and go, well, you know, let's put the fees and let's put the revert rates in. Let's do a standard loan size and let's work out what the comparable interest rates are. And that's why it's called a comparison right now. The one thing I would caution everyone on is that that's just a comparison of the rate, not necessarily a comparison of the product. So you then need to start thinking about other things you can do with that loan, the features it offers, does it have our pricing, Does it do offsets or multiple offsets? Does it have a redraw? Because if it starts doing those, depending on your circumstances, the comparison rates might tell you one answer, but the other things you might use the loan for could give you a better outcome. So you really need to either talk to your broker or your banker and work out what's best for you and your circumstances. But absolutely, the comparison rate is one of the first tools you can use to try and distinguish one of which loan might be better than the other based on rate one.

Bryce: [00:20:36] Now, Andre, here in Australia, the vast majority of home loans are variable. Yeah. Compare that to what's over in the US where you can fix for 30 years. Yes. Which is amazing. Yeah. If you get the right answers. Right? 

Bryce: [00:20:51] So I guess it is fixed as an option here in Australia. And why don't more people use that if it is. 

Andre: [00:20:57] Yeah. That's a question I get a lot. And the short answer is yes, fixed is an option here in Australia, not to the extent of the US. So said most loans in Australia that are fixed loans are typically from one year terms to five year terms. So at ubank we have a one year or two year, three year and a five year term for fixed rates and then they go back to variable. So yes, fixed is an option. But you touch on an interesting point, which is they're not as popular or don't seem to be as widely used in Australia. And the Nats, I'm going to say a bit of a point in time type thing. So, you know, we've all sort of heard about the mortgage rate cliff recently in the press and what that really represents is that for a period of time, a couple of years ago when interest rates were really, really low, a lot of people were fixing their loans. So you might think the long term averages that, you know, more than 70% of people are using variable and less than, you know, 20 or 30% are using fixed at that point in time, that was wildly reversed. And that was because people at that point in time thought these rates are really low, lock them in for as long as I can and make those repayments low. So depending on where you are in the rate cycle, effectively you see the utilisation of fixed and variable change. For example, right now we keep hearing that we think that the variable rates are nearing the peak. So we see a lot of people buying variable rate loans. At the moment we're using variable rate loans because they anticipate the variable rate to come back down and they don't want to lock into a higher fixed rate at this point in time. So yes, in the long run there is definitely a much higher proportion of variable versus fixed loans. But you know, at various points in the cycle, you see that swing around from either favouring fixed or favouring variable.

Alec: [00:22:28] So Andre, I want to turn to your personal experience. You said earlier that you've just bought a home, so I'm sure there's some tips and tricks you can give Price and I, but I'm sure you've also had thousands, tens of thousands of first home buyers walk through your doors. Yeah. Like what are the common mistakes that you say people make? What should we be avoiding? 

Andre: [00:22:45] Yeah, that's a great one. So I think, you know, it is it's quite a complicated process. I should really acknowledge that first. And people don't do it often. Yeah. First time property buyers, as you say, it's like, you know something you do maybe three, maybe five times in your life if you're really, really lucky. So appreciating that it is complicated as a first step is one thing you need to do, and the other one is I use this phrase don't FOMO or YOLO It. Yeah. So it's not a thing that you rush. 

Alec: [00:23:10] Easy to say. It's so much harder to do.

Andre: [00:23:11] So much harder to do. Well, property is exciting. You want to be on the ladder and you feel you need to get there quite quickly, but you need to do your homework first. And I can't stress that enough because that's where big mistakes can be made. And yeah, we don't want anyone to end up in that situation. So one of the things, one of the biggest mistakes I sort of divided into stages of the process. So before you start searching, we talked about the borrowing power. Make sure you know what your boring power actually is just searching for the right size property, the right value you've taken into account the strata fees and the ongoing run costs, because the last thing you want to do is get the maximum loan you think you can afford budget for that, move into the property and then find out all these extra costs are coming out of your pocket and your standard of living isn't quite what you were sort of hoping or expecting it to be. So big Step number one, understand, boring power. That's a big mistake. People will go for the maximum and then find out it's very difficult to live and make those repayments. The next thing I'd say is before you make an offer, there are some big steps here and these aren't necessarily home loan steps. These are going to be things like making sure that you get a conveyancer to review the contract for the property you're buying. Yeah, that's critically important. You've got to make sure that you clearly own the property review, the strata report. So the number of properties I looked at in Sydney where I looked at the Strata report and I knew there was going to be this big lump sum levy that I simply didn't have the cash aside to be able to pay into. So for me it was about finding a property that I thought, you know, was more secure for my financial circumstances. So getting the strata report and reviewing that was very, very important, particularly if you're buying in strata building and pest inspections. Again, you don't want a nasty surprise. When the property looks good, you move into it and find out, you know, the termites have got it or stuff like that. So those can be big surprises because you get caught up in a rush, particularly in the Sydney market, where you think you have to move very, very quickly. But if you move quickly and you skip one of those steps and they turn out to be one of the critical steps that you shouldn't have skipped, it can get quite expensive quite fast. So that's the sort of before off a thing. And then as I mentioned before, get your pre-approval. Yeah, you've got to make sure that's a fully verified pre-approval and that fully verify point is important. You want to make sure the bank has checked your income, they've checked your expenses, your credit score, your assets and liabilities. And that loan offer that they're giving you is going to be what you're going to get. You don't want to go and make an offer, pay a deposit, and then find out when you go back to the bank they missed something or you haven't provided some information or you missed something, and then suddenly that offer disappears. You don't actually have that. And now you're left potentially with the loss of your deposit. And then the next big mistake that sometimes people make is what I call the before settlement types of mistakes. So things like getting property insurance, you know, make sure that the property is insured from the day you move in. You don't want it to accidentally catch fire just as you've taken possession of it. And that becomes a bit of a problem for you. And then there's a thing called title insurance, particularly, you know, to make sure that you've got clear title that the nobody can take that property away from you ultimately. So those are the sorts of things that that they're not glamorous, but they actually really, really help protect you from really dire consequences of not doing those if things go wrong. 

Bryce: [00:26:14] The insurance one is a good one. Something that I well, we hadn't thought about. And I think even in you're doing the maths of what you can afford to repay, like figuring out what your home and contents insurance is likely to be, because when you're renting, I'm not going. 

Alec: [00:26:28] We did it. We did an episode recently on Equity Mates Investing podcast where we were speaking to a financial advisor and he made the point that if you lumped all your insurance payments together, it's like your second biggest line item after housing costs. And, you know, just you mentioning like property insurance and also title insurance. I was like, yeah. 

Bryce: [00:26:50] Contents. 

Alec: [00:26:53] In short. Yeah. So what like, so there's three there. There's property like protect the property and then contents so you can probably roll them together into home and contents. And then there's title insurance. Any other insurances that we need to add to the list?

Andre: [00:27:09] Not from my perspective. I'm sure there are some, but. But those are the ones I have.

Bryce: [00:27:12] So pseudo strata. I guess if you're doing a partner and it kind of. 

Alec: [00:27:16] Is that an insurer? 

Bryce: [00:27:18] Take away that you don't need to do property insurance and strata do you. 

Andre: [00:27:23] No, so what happens if it's a strata fee the building insurance is covered with your strata. Yeah, absolutely. But you still need your contents insurance.

Alec: [00:27:32] Then if you're buying it as an investment property, then you can get landlord insurance.

Andre: [00:27:36] Well, exactly. Yes. The list goes on and on.

Bryce: [00:27:39] To your point, on the Strata report, we were looking at one and it was all looking good. And then we looked at the Strata report and they had like an upcoming, you know, $60,000 rent on the lift or something. 

Alec: [00:27:51] 60,000 per.

Bryce: [00:27:52] Episode. But it was like six apartments or something. So looking at ten or 20 grand or something and you're just like, if that comes the day we said, oh, like, yeah, what if it comes in?

Alec: [00:28:04] If those estimates 

Bryce: [00:28:06] Are Wrong? Yeah, exactly. 

Andre: [00:28:07] Yeah, yeah. I've had those wall stories and some cladding, all sorts of things, buildings crumbling.

Bryce: [00:28:15] So when it comes to the repayment, you get the loan, you've settled, you're feeling great, your insurance is ticked, you're starting to make your repayments. Does it matter if you're doing weekly, fortnight nightly or monthly repayments? 

Andre: [00:28:27] The short answer, absolutely it does, but I'm going to give you a mathematical answer and a practical answer to that question. So the mathematical answer is just the way that interest is charged on a loan is it's accrued daily and it's payable at some frequency, typically monthly. Yeah. And why does that matter and how does that answer the question you just asked? So if you have a loan, let's say we'll use a $100,000 example again and you start the start of the month, the first month with $100,000 loan and you make a payment on it, your first let's call it weekly payment of $2,000. So it's now a $98,000 outstanding loan. You're paying interest for the rest of the month on the $98,000, so you're paying less interest overall. Now, if you said, well, hang on a minute, I'm going to keep that until the end of the month. Now you've got 100,000 a loan right from the start of the month, and you're paying interest on that same hundred thousand dollars for the whole month. Yeah. So mathematically, the point is that the quicker you make the payment or the sooner you make the repayment being a more appropriate point, the less interest you pay overall. So the mathematical answer is that the earlier pay it, the less interest you're actually being charged or you're accruing on the loan pay daily. Well, you could pay daily, and that's where the practical point comes in. So practically, at least the way I do it is I line up my payments to my pay cycle, so I get paid fortnightly and I will make whatever payment I can afford. It's a fixed payment, but basically I worked out what my monthly payment was and I pay it out of my fortnightly pay cycle as it goes through to try and reduce my interest overall. 

Alec: [00:29:57] Well, here's something that we figured out here at Equity Mates is that we use zero not sponsored by pretty good accounting software. Yeah. Yeah. And we pay fortnightly but we do have we could pay at any frequency we want. Yeah. So we could pay ourselves daily. 

Bryce: [00:30:15] Straight into the mortgage. 

Andre: [00:30:18] That would be interesting to know. 

Alec: [00:30:20] Something to look into. Yeah.

Bryce: [00:30:22] So as frequent as possible, But the bank will then still just charge the interest on a monthly basis is typically Yes. 

Andre: [00:30:28] Yes. 

Bryce: [00:30:28] So that you can pay as frequently as you want, but they'll do the calculation monthly.

Andre: [00:30:32] So some people will get paid monthly and as soon as the monthly pay. It goes in. They just make the payment as soon as they can. And that works as well. So it's not you don't need to particularly go out of your way to change the repayments. But ideally, what you don't do is delay making the repayment. If you've got the cash available that would be spent on that loan anyway. 

Bryce: [00:30:49] Now, one quick question before a final is around buyers agents. Yeah, in a market like this where supply is tight, I'm hearing rumblings that more and more people are turning to buyers' agents. 

Alec: [00:31:01] Bryce says hearing rumblings he's really watched through seasons of luxe listings anyway.

Bryce: [00:31:07] In your situation, did you use one through Ubank? Are you seeing more clients come having used a buyer's agent? And then finally everything you mentioned around checking strata report, conveyancing, all that sort of stuff. Is that something buyer's agents do on your behalf. 

Alec: [00:31:21] To roll that all up into one question? Is it worth it? 

Andre: [00:31:24] Is it worth it? So I can happily report I did use a buyer's agent in the end, and I think I mentioned earlier I have been looking for property for a couple of years and I was not getting very far. And largely because I was making one big mistake, I was trying to time the market. So we'll use the equity adage there. So I should have got in quicker and I wasn't moving fast enough because I couldn't actually be available to do inspections during the week when properties were getting listed and I kept missing out, properties were being listed. Come the weekend they were sold. I just couldn't get my foot in the door. So I went down the buyer's agent pathway and I highly recommend the experience there for a few reasons. One, you talked about, do they help with, you know, making sure that you get the right conveyancing. You've done the straw to report the building and pest inspection. Do they do a review? Are they acting on your behalf basically, to help you on the property journey? I was lucky. I had a really good one. That person made very quickly for me and really helped me make sure that I ticked all those boxes, but more importantly, tick them very quickly. So I had seen a property with that agent. They had videoed it for me on a monday morning. Come Monday afternoon, I was looking at the property. Tuesday evening. I had made a successful offer. The contracts had exchanged. Yeah. Now take it from two years worth of looking to closing and two days that that was quite, quite important and successful as far as I'm concerned. The other thing the buyer's agent did for me, and this is a little bit connected to one of the other things we did not necessarily talk about, but it's worth bringing up here is that they were able to make sure I paid the right price for the property. Yeah. So I talked about the den family, although all that sort of stuff. And we all know that in the Sydney market the property prices are quite hot and it would be too easy to overpay, particularly because buying your first home is quite emotional experience. And when you do fall in love with the property, reason goes by the wayside and you ultimately might offer too much on that property. The buyer's agent is objective and they can negotiate on your behalf. So much so that I had given the buyer's agent a certain amount they should spend and they actually ended up spending something like seven and a half to 10% less than I would have paid for the property, just purely because of the way they did the homework. The more experience I have in the local market and the negotiation tactics they used to secure me a better outcome. And why is that important? That's important because after the pre-approval process we talked about, for there is another step afterwards, which is the unconditional offer or unconditional approval process. And what does that mean? It's a very, very big term. It means that the bank needs to look at the contract of the property you've purchased and they need to look at the value of the property you've purchased to make sure you haven't over offered. Yeah, doesn't mean you can't get the property. It just means you might need to pay more of a deposit than you thought if you paid too much. So when we're talking about the 80% alveolar type properties, you need to make sure that the bank value that comes back to the property and what you offered are hopefully roughly the same. Otherwise, you might need to come up with more of a deposit. So that all wraps up to, in my experience, buyer's agents well worth it, but I'm pretty sure as with anything, make sure you get a good one. 

Alec: [00:34:19] Yeah, that's. That's the big challenge. Sandra We could talk property for a long time, but we are running over time, so let's just wrap it up with a general question for Bryce and I, for people listening who want to get started on their property journey, who want to learn more, what should we do and what are the great resources that we can access to learn more? 

Andre: [00:34:42] Yeah. So in terms of what should you do and what great resources you should look at, so I shall recommend you come to your bank account. Are you as a first step and just have a look at a borrowing power calculator and see what you can afford. That's like the best thing you can do just to set yourself up. Then I'd encourage you to talk to one of our bankers. You can call them. They can help you through the process. Or if you're going to go through a broker, ask them to talk to you about your bank home loan as well. So we've got lots of brokers on our panel. One of them can help you too. And this comes under the banner of getting help. Yeah. So it's okay to ask for help. This is not something people do regularly. The bank is there to help you. Ubank is here to help you. Yeah. So make sure you're talking to someone. They're guiding you through the process. And if you're going down the buyer's agent pathway, do that early on because they can help you with some of the other steps that I talked about. And the other thing that I recommend you do is as you go through talking to the bank and the brokers. Make sure you pick a product, a financial product that actually is going to work for you long term. So think about the things you want to do. Is it going to become an investment property? What features do you want? Does it have to have an offset or radial? Because ultimately, once you're committed and you've settled on the loan, you want that to be the last thing you need to worry about because you're setting up the home and decorating and all that sort of stuff. So those would be the things I'd recommend people do and the people you talk to. Ultimately, it all starts with visiting your bank to accommodate. Are you talking to us or applying online or looking at a borrowing power calculator and that will get you well on your way.

Alec: [00:36:07] Love it. I mean, it's a complicated journey, but it's a journey that every Australian seems to do well, every Australian wants to be on. Not even seems to just. Yeah, absolutely. So thank you for sharing your time and making it a little bit less complicated for us

Andre: [00:36:23] Thank you, too. Thanks for having me on the show. Yeah. 

Bryce: [00:36:26] We'll let you know if you buy a house. 

Andre: [00:36:27] Yeah, but you should be applying online.