1 00:00:00,120 --> 00:00:02,920 Speaker 1: Interest rate rise ten smart money moves to help protect 2 00:00:02,960 --> 00:00:16,759 Speaker 1: your mortgage and your mortgage free goals. Welcome back to 3 00:00:16,760 --> 00:00:20,560 Speaker 1: Sugar Mama's Fireplay. I am your host financial planner, Canna Campbell, 4 00:00:20,560 --> 00:00:24,000 Speaker 1: and today's episode is for anyone who has recently seen 5 00:00:24,040 --> 00:00:27,319 Speaker 1: their mortgage repayments change, that is, increase and at the 6 00:00:27,320 --> 00:00:29,319 Speaker 1: same time. Of course, like me, you have felt that 7 00:00:29,520 --> 00:00:32,640 Speaker 1: sinking feeling in your stomach. You know, it's nothing wonderful 8 00:00:32,720 --> 00:00:35,519 Speaker 1: to celebrate about rates going up, but I know that 9 00:00:35,800 --> 00:00:38,760 Speaker 1: for so many of you it does feel disheartening, it 10 00:00:38,800 --> 00:00:41,640 Speaker 1: feels frustrating, and it feels even a little bit unfair. 11 00:00:41,760 --> 00:00:44,880 Speaker 1: We have all been budgeting, we've all been so disciplined, 12 00:00:44,920 --> 00:00:47,440 Speaker 1: and we've all been doing our best, busting our balls 13 00:00:47,440 --> 00:00:50,000 Speaker 1: to just try and get ahead. So this is just 14 00:00:50,159 --> 00:00:52,880 Speaker 1: a really annoying situation where you finally feel like you're 15 00:00:52,880 --> 00:00:54,520 Speaker 1: making progress and can see light at the end of 16 00:00:54,560 --> 00:00:58,400 Speaker 1: the tunnel. The goalposts have been moved. But for today's episode, 17 00:00:58,440 --> 00:01:01,120 Speaker 1: which is an ask Adam episode, we want you to 18 00:01:01,160 --> 00:01:03,560 Speaker 1: make sure that you understand you do not need to 19 00:01:03,560 --> 00:01:06,039 Speaker 1: be giving up on your mortgage free goals. None of 20 00:01:06,120 --> 00:01:08,920 Speaker 1: us are powerless here and this episode is not about 21 00:01:08,920 --> 00:01:11,720 Speaker 1: bitching and moaning and complaining about the RBA, and it's 22 00:01:11,760 --> 00:01:15,000 Speaker 1: certainly not about predicting what rates will do next. This 23 00:01:15,200 --> 00:01:19,520 Speaker 1: Ask Adam episode is a solution driven conversation. We're going 24 00:01:19,560 --> 00:01:22,000 Speaker 1: to explore what you can actually do make sure that 25 00:01:22,040 --> 00:01:23,760 Speaker 1: you are not overpaying for your home and that you 26 00:01:23,800 --> 00:01:27,319 Speaker 1: can stay on track with those important, valuable mortgage free 27 00:01:27,400 --> 00:01:29,720 Speaker 1: goals of yours. So, Adam, thank you for coming back 28 00:01:29,760 --> 00:01:32,520 Speaker 1: on the show. I love doing these Ask Adam episodes. 29 00:01:32,680 --> 00:01:34,920 Speaker 1: I get such great feedback from everyone who's listening, and 30 00:01:34,959 --> 00:01:36,640 Speaker 1: you've been able to also help so many of our 31 00:01:36,680 --> 00:01:39,600 Speaker 1: listeners as well with their mortgages and getting rid of 32 00:01:39,640 --> 00:01:42,319 Speaker 1: loyalty tax and getting back on track with managing their 33 00:01:42,360 --> 00:01:45,520 Speaker 1: own debts and even debt recycling. So, you know, thank 34 00:01:45,560 --> 00:01:48,200 Speaker 1: you for your time. I want to get straight into it. 35 00:01:48,320 --> 00:01:51,200 Speaker 1: Sorry to cut you off, because I'm just feel like 36 00:01:51,200 --> 00:01:56,040 Speaker 1: there's so much frustration, disappointment, and even a little bit 37 00:01:56,040 --> 00:01:58,960 Speaker 1: of I guess despair with this recent interest rate rise. 38 00:01:59,120 --> 00:02:01,440 Speaker 1: You know, where do we start with this? What's the 39 00:02:01,600 --> 00:02:04,480 Speaker 1: very first thing someone can do now that we've been 40 00:02:04,760 --> 00:02:08,040 Speaker 1: informed and notified as to what our newly increased mortgage 41 00:02:08,040 --> 00:02:08,880 Speaker 1: your payments are. 42 00:02:08,880 --> 00:02:10,600 Speaker 2: Well, the first and the most at the same time, 43 00:02:10,639 --> 00:02:12,320 Speaker 2: most boring thing is you've just got to review your 44 00:02:12,360 --> 00:02:14,760 Speaker 2: budget make sure that you can afford the change. I'd 45 00:02:14,800 --> 00:02:17,520 Speaker 2: like to think most borrowers can because we've come from 46 00:02:17,680 --> 00:02:20,520 Speaker 2: a few rate cuts prior to this, so it's not ideal, 47 00:02:20,639 --> 00:02:23,960 Speaker 2: but hopefully most people's budgets can absorb that. While you're 48 00:02:24,000 --> 00:02:26,640 Speaker 2: at it, review that you can factor in another rate rise, 49 00:02:26,720 --> 00:02:29,400 Speaker 2: potentially in May, which is looking likely. I would hope 50 00:02:29,440 --> 00:02:31,200 Speaker 2: that would be the last one for the year. But 51 00:02:31,680 --> 00:02:33,639 Speaker 2: you just need to look after your finances and make 52 00:02:33,680 --> 00:02:35,120 Speaker 2: sure that that your factor in it if you've got 53 00:02:35,120 --> 00:02:36,600 Speaker 2: to make because other costs are going up. 54 00:02:36,639 --> 00:02:39,160 Speaker 3: You know, we read really health introan health. 55 00:02:39,040 --> 00:02:40,359 Speaker 1: Insurance read that the other day. 56 00:02:40,440 --> 00:02:41,400 Speaker 3: Yeah, so if you're. 57 00:02:41,280 --> 00:02:43,800 Speaker 2: Updating that in your budget, depending on how much Covey 58 00:02:43,800 --> 00:02:46,640 Speaker 2: you've got, that might be the equivalent of the rate 59 00:02:46,760 --> 00:02:47,320 Speaker 2: rise as well. 60 00:02:47,400 --> 00:02:49,079 Speaker 1: So it's a really tough time, so you've got to 61 00:02:49,160 --> 00:02:51,880 Speaker 1: keep a close eye on your budget and cash flow. 62 00:02:51,880 --> 00:02:54,360 Speaker 2: If you've got to make some sacrifices, then that's better 63 00:02:54,400 --> 00:02:56,160 Speaker 2: than having to sell and start all over. 64 00:02:56,000 --> 00:02:58,880 Speaker 1: Again, especially with things like the cost of getting back 65 00:02:58,880 --> 00:03:00,200 Speaker 1: into the market. Stane Duty and. 66 00:03:00,160 --> 00:03:01,760 Speaker 2: This is what I always amm down is that you 67 00:03:01,840 --> 00:03:04,800 Speaker 2: want to be reviewing your budget annually. Anyway, you'd want 68 00:03:04,880 --> 00:03:07,480 Speaker 2: to do it every new year, because it's freshet of eyes, 69 00:03:07,840 --> 00:03:09,560 Speaker 2: fresh attitude, and you cut as much. 70 00:03:09,680 --> 00:03:10,520 Speaker 3: You know that you don't need. 71 00:03:10,680 --> 00:03:13,519 Speaker 1: You've always been a massive advocate of just simply picking 72 00:03:13,560 --> 00:03:16,360 Speaker 1: up the phone and calling the bank and asking them 73 00:03:16,400 --> 00:03:18,560 Speaker 1: for a better deal and even better. You know, I 74 00:03:18,600 --> 00:03:21,040 Speaker 1: love your haark about checking what the bank or offering 75 00:03:21,080 --> 00:03:23,240 Speaker 1: new customers and seeing if the bank can beat it 76 00:03:23,360 --> 00:03:24,560 Speaker 1: or at least match it. 77 00:03:24,600 --> 00:03:24,720 Speaker 2: Is. 78 00:03:24,720 --> 00:03:26,720 Speaker 1: This still where you stand. 79 00:03:26,639 --> 00:03:29,240 Speaker 2: Definitely, But the cost of banks and lenders out there 80 00:03:29,280 --> 00:03:32,040 Speaker 2: really understand now that the cost of winning new customers, 81 00:03:32,080 --> 00:03:34,760 Speaker 2: it's a difficult process. It's expensive for them, and brokers 82 00:03:34,800 --> 00:03:37,520 Speaker 2: are accounting for more than seventy percent of the market share, 83 00:03:37,640 --> 00:03:40,480 Speaker 2: so they understand that if they're not looking after their 84 00:03:40,520 --> 00:03:43,320 Speaker 2: customers that they will leave. So, particularly if you've been 85 00:03:43,320 --> 00:03:46,119 Speaker 2: a loyal, long term customer, call your bank and ask 86 00:03:46,160 --> 00:03:48,680 Speaker 2: for a better deal. Look at what they're offering new customers, 87 00:03:48,840 --> 00:03:51,000 Speaker 2: and look at what their competitors. So if you're with 88 00:03:51,000 --> 00:03:53,240 Speaker 2: a major bank, look at what they're doing and give 89 00:03:53,240 --> 00:03:54,760 Speaker 2: them a call and ask for a better deal. If 90 00:03:54,800 --> 00:03:56,280 Speaker 2: you've been with them for a long period of time, 91 00:03:56,360 --> 00:03:57,880 Speaker 2: they should be giving you something. 92 00:03:57,720 --> 00:04:01,160 Speaker 1: Out of interest. Did all lenders pass on the interest 93 00:04:01,240 --> 00:04:01,800 Speaker 1: rate rise? 94 00:04:02,120 --> 00:04:05,440 Speaker 2: Of course they did. Yeah, they've all passed that on 95 00:04:05,560 --> 00:04:07,880 Speaker 2: and always will. It's only when it's in the reverse 96 00:04:07,880 --> 00:04:11,040 Speaker 2: that we're looking at any discrepancy there around not passing 97 00:04:11,440 --> 00:04:12,400 Speaker 2: the cuts on in full. 98 00:04:12,560 --> 00:04:15,120 Speaker 1: When it's a cut all right, On that note of rates, 99 00:04:15,320 --> 00:04:18,400 Speaker 1: what is actually a competitive rate right now? And I 100 00:04:18,440 --> 00:04:20,600 Speaker 1: know that's like asking how long is a piece of string, 101 00:04:20,600 --> 00:04:23,719 Speaker 1: because it really does depend on whether it's fixed or variable, 102 00:04:23,800 --> 00:04:26,200 Speaker 1: whether it's interest only or principle injuries. But can you 103 00:04:26,240 --> 00:04:28,680 Speaker 1: give me some really sort of rough benchmarks so I 104 00:04:28,680 --> 00:04:30,599 Speaker 1: can compare my rates to see if I'm on a 105 00:04:30,600 --> 00:04:32,720 Speaker 1: good deal or not and whether only do something about it. 106 00:04:32,839 --> 00:04:34,720 Speaker 2: So we're still in that tricky period where not all 107 00:04:34,800 --> 00:04:37,200 Speaker 2: rate rises have been passed on by lenders and bank 108 00:04:37,240 --> 00:04:39,680 Speaker 2: says yet that's I feel like that will be finalized 109 00:04:39,720 --> 00:04:42,039 Speaker 2: by the end of this week. So pre rate rise, 110 00:04:42,440 --> 00:04:45,159 Speaker 2: I think a really good and fair rate variable ratus 111 00:04:45,200 --> 00:04:48,640 Speaker 2: five point two five for a homeowner for unoccupy with 112 00:04:48,680 --> 00:04:51,480 Speaker 2: principal injuriest payments, that can you know, if you're slightly 113 00:04:51,520 --> 00:04:53,880 Speaker 2: higher then that that's fine because around that five two 114 00:04:53,920 --> 00:04:57,560 Speaker 2: five mark, you know, we're seeing that for competitive transactions 115 00:04:57,560 --> 00:05:00,320 Speaker 2: like high debt levels with high equity, and that's what 116 00:05:00,360 --> 00:05:03,200 Speaker 2: banks and lenders will really start giving high discounts to 117 00:05:03,200 --> 00:05:05,560 Speaker 2: to win that type of customer because it's high value, 118 00:05:06,279 --> 00:05:08,760 Speaker 2: low risk if you've got a lot of equity, and 119 00:05:09,000 --> 00:05:11,560 Speaker 2: obviously if you've got a large debt, you've got high income. 120 00:05:11,600 --> 00:05:12,560 Speaker 3: The bank's value you're a. 121 00:05:12,600 --> 00:05:15,040 Speaker 1: Valuable client there were before all the way through. 122 00:05:15,640 --> 00:05:19,440 Speaker 2: It is a target to cross sell insurances to contents, insurance, 123 00:05:19,440 --> 00:05:21,200 Speaker 2: all that type of stuff. That's why it's not always 124 00:05:21,200 --> 00:05:23,080 Speaker 2: fair to just tell you the lowest rate because there 125 00:05:23,080 --> 00:05:26,040 Speaker 2: are so many factors coming to that. Yeah, it's a bit, 126 00:05:26,040 --> 00:05:27,800 Speaker 2: and then there's different products. So you've got a no 127 00:05:27,880 --> 00:05:30,720 Speaker 2: frills type product that you might get with a non major, 128 00:05:30,720 --> 00:05:33,040 Speaker 2: a second tier lender. So then that just comes down 129 00:05:33,080 --> 00:05:35,760 Speaker 2: to individual circumstances and that's what a good broker will 130 00:05:35,760 --> 00:05:38,240 Speaker 2: work through with you to understand which one fits your 131 00:05:38,440 --> 00:05:39,760 Speaker 2: mold and gets you the best deal. 132 00:05:39,920 --> 00:05:41,880 Speaker 1: All right, this is probably a question that all of 133 00:05:41,880 --> 00:05:44,440 Speaker 1: your clients like calling you right now. Should we be 134 00:05:44,480 --> 00:05:47,400 Speaker 1: looking at fixing. And if the answer is yes, like 135 00:05:47,400 --> 00:05:49,800 Speaker 1: what are the rates that the banks are offering, I 136 00:05:49,800 --> 00:05:52,640 Speaker 1: imagine they've already gone up in anticipation of maize. 137 00:05:52,880 --> 00:05:54,520 Speaker 3: Yeah, that chip's already sailed. 138 00:05:54,560 --> 00:05:57,239 Speaker 2: You know, the fixed rates really jumped around October November 139 00:05:57,320 --> 00:05:59,960 Speaker 2: last year, and essentially they've already factored in the rate rise. 140 00:06:00,279 --> 00:06:03,159 Speaker 2: Fix rates at the moment the lowest with a reputable 141 00:06:03,200 --> 00:06:06,280 Speaker 2: lender from one year to three years is about five 142 00:06:06,320 --> 00:06:08,159 Speaker 2: point five. So if you look at it from the 143 00:06:08,160 --> 00:06:10,719 Speaker 2: best variable rate at the moment pre rate rise being 144 00:06:10,760 --> 00:06:13,200 Speaker 2: five point twenty five, that as of this week is 145 00:06:13,240 --> 00:06:14,800 Speaker 2: five point five, So you can get a one year 146 00:06:14,839 --> 00:06:17,719 Speaker 2: fix rate at five point five. Then up to three years, 147 00:06:17,720 --> 00:06:19,599 Speaker 2: you know, they go up to high fives, five eighths, 148 00:06:19,680 --> 00:06:20,239 Speaker 2: five nines. 149 00:06:20,600 --> 00:06:23,560 Speaker 1: Do you see value there or is the course already bolted? 150 00:06:23,839 --> 00:06:25,160 Speaker 3: So I think it's already bolted. 151 00:06:25,200 --> 00:06:27,960 Speaker 2: It would take something very drastic to happen in them, 152 00:06:28,080 --> 00:06:31,760 Speaker 2: whether it's world markets or in Australia for that to change. 153 00:06:31,839 --> 00:06:34,200 Speaker 2: I just think variable sticking out with variable as a 154 00:06:34,240 --> 00:06:36,520 Speaker 2: way to go. There's so much pressure on the government 155 00:06:36,560 --> 00:06:39,559 Speaker 2: now around their spending and trying to help get inflation lower. 156 00:06:39,600 --> 00:06:41,880 Speaker 2: I don't see what much more mortgage holders can be 157 00:06:41,880 --> 00:06:45,440 Speaker 2: doing in terms of keeping inflation low, Like there's expenses 158 00:06:45,440 --> 00:06:48,479 Speaker 2: and spending. So yeah, the RBA cash rate increases is 159 00:06:48,480 --> 00:06:51,760 Speaker 2: a really unfair punishment on mortgage holders in my opinion. 160 00:06:51,839 --> 00:06:54,360 Speaker 2: So I just think, stick it variable and do what 161 00:06:54,400 --> 00:06:56,960 Speaker 2: you're doing, wait for the tide to turn. 162 00:06:56,920 --> 00:06:59,400 Speaker 1: When it comes to fixing. You know, say someone got 163 00:06:59,480 --> 00:07:02,960 Speaker 1: lucky and managed to fix say six months ago, or 164 00:07:03,080 --> 00:07:05,240 Speaker 1: you know someone is actually in a position where they're 165 00:07:05,320 --> 00:07:07,320 Speaker 1: terrified and they think, you know what I do actually 166 00:07:07,400 --> 00:07:09,200 Speaker 1: want to I'm happy to pay a bit more, even 167 00:07:09,240 --> 00:07:11,560 Speaker 1: if it's not great value for money. What are the 168 00:07:11,560 --> 00:07:13,360 Speaker 1: pros and cons of fixing? 169 00:07:13,600 --> 00:07:17,320 Speaker 2: So fixing first and foremost gives you certainty, so you 170 00:07:17,360 --> 00:07:19,920 Speaker 2: then take yourself out of that market where cash rate 171 00:07:20,040 --> 00:07:23,200 Speaker 2: rises will affect your month to month cash flow. So 172 00:07:23,280 --> 00:07:25,160 Speaker 2: you lock in what your repayments will be for that 173 00:07:25,200 --> 00:07:27,960 Speaker 2: fixed term. So that's the biggest pro. The cons You've 174 00:07:27,960 --> 00:07:30,800 Speaker 2: got no flexibility, so you can't use an offset account, 175 00:07:30,880 --> 00:07:33,600 Speaker 2: and depending on the lender and their fixed rate policy, 176 00:07:33,960 --> 00:07:35,800 Speaker 2: you may or may not be able to pay extra 177 00:07:36,240 --> 00:07:36,760 Speaker 2: per year. 178 00:07:36,840 --> 00:07:39,240 Speaker 1: Yeah, normally have like a really low limit like ten 179 00:07:39,320 --> 00:07:41,680 Speaker 1: fifteen thousand dollars extra and then that's it. 180 00:07:41,880 --> 00:07:44,360 Speaker 2: Yeah, somemmer zero. But most I'd say around that ten 181 00:07:44,360 --> 00:07:46,480 Speaker 2: thousand dollar mark. And that may be enough for most 182 00:07:46,520 --> 00:07:48,440 Speaker 2: households who just say, look, I could never pay that 183 00:07:48,520 --> 00:07:49,920 Speaker 2: much extra per year anyway. 184 00:07:50,240 --> 00:07:52,040 Speaker 1: So if the numbers do stack up, and I guess 185 00:07:52,080 --> 00:07:54,040 Speaker 1: this is why you're having a good mortgage broker that 186 00:07:54,040 --> 00:07:56,720 Speaker 1: can help you, that's right, go through and run the numbers. 187 00:07:56,760 --> 00:07:58,520 Speaker 2: But it's also if there is a big change in 188 00:07:58,520 --> 00:08:00,440 Speaker 2: the variable rates, and we see a few really quick 189 00:08:00,520 --> 00:08:03,080 Speaker 2: rate cuts, then you're locked into a higher rate and 190 00:08:03,080 --> 00:08:04,720 Speaker 2: you're stuck on it. And if you don't want to 191 00:08:04,760 --> 00:08:07,200 Speaker 2: pay that fix rate anymore, you can break the fixed rate. 192 00:08:07,360 --> 00:08:08,800 Speaker 2: But that comes with break fees. 193 00:08:09,240 --> 00:08:13,600 Speaker 1: What is a break fee? It's like that free I 194 00:08:13,640 --> 00:08:16,000 Speaker 1: remember a friend had to pay thirty five thousand, yeah, 195 00:08:16,000 --> 00:08:17,119 Speaker 1: because they were selling their place. 196 00:08:17,280 --> 00:08:20,640 Speaker 2: Yeah, and that's terrible. The break fee is what's called 197 00:08:20,680 --> 00:08:24,040 Speaker 2: an economic cost to the bank, and essentially, really simple terms, 198 00:08:24,120 --> 00:08:27,000 Speaker 2: the bank do not want to lose on that fixed contract. 199 00:08:27,080 --> 00:08:30,080 Speaker 2: So if you engage a fixed rate loan at let's 200 00:08:30,120 --> 00:08:33,040 Speaker 2: just call it five percent for three years and then 201 00:08:33,240 --> 00:08:35,600 Speaker 2: a year and a half down the track, Yeah, like 202 00:08:35,679 --> 00:08:38,120 Speaker 2: your friend that you change your circumstances and you had 203 00:08:38,160 --> 00:08:41,320 Speaker 2: to sell, and at that time the rates had dropped 204 00:08:41,320 --> 00:08:43,439 Speaker 2: down to four percent, So the three year fix rate 205 00:08:43,480 --> 00:08:45,720 Speaker 2: went from five percent when you signed it, so any 206 00:08:45,760 --> 00:08:47,840 Speaker 2: new customer that wanted a three year fix rate would 207 00:08:47,840 --> 00:08:49,679 Speaker 2: then be on four percent. The bank look at that 208 00:08:49,880 --> 00:08:52,880 Speaker 2: economic cost of being Okay, you're no longer having this 209 00:08:52,960 --> 00:08:55,200 Speaker 2: fix rate with us for the next eight en months 210 00:08:55,240 --> 00:08:58,880 Speaker 2: at five percent, we need to resell that money to 211 00:08:58,960 --> 00:09:01,760 Speaker 2: a new customer at four percent, So we're losing one 212 00:09:01,800 --> 00:09:04,679 Speaker 2: percent for eighteen months, and that is your economic cost, 213 00:09:05,080 --> 00:09:07,040 Speaker 2: whatever that difference is in that end rate. 214 00:09:07,280 --> 00:09:09,880 Speaker 1: If you're in a situation where you are upgrading the home, 215 00:09:09,960 --> 00:09:11,840 Speaker 1: so you're an apartment and you're on a fixed rate 216 00:09:11,960 --> 00:09:14,440 Speaker 1: and you found a new home, can you avoid that 217 00:09:14,520 --> 00:09:16,320 Speaker 1: by staying with the bank and shifting the loan to 218 00:09:16,360 --> 00:09:20,440 Speaker 1: the new properties. Is that physically they can be transferable? Yes, yeah, Okay, 219 00:09:20,559 --> 00:09:21,160 Speaker 1: that's good to know. 220 00:09:21,320 --> 00:09:23,840 Speaker 2: Yeah, but the timing of that can be difficult, but 221 00:09:23,880 --> 00:09:26,520 Speaker 2: they can be transferable. Not with everybody, but I think 222 00:09:26,520 --> 00:09:27,600 Speaker 2: the majority allow. 223 00:09:27,440 --> 00:09:31,760 Speaker 1: That flexibility, and a good mortgage again guides you through that. Okay, 224 00:09:32,040 --> 00:09:34,000 Speaker 1: moving on to I saw about this the other day 225 00:09:34,160 --> 00:09:36,960 Speaker 1: with someone else, but about investment loans, and you know, 226 00:09:37,160 --> 00:09:39,079 Speaker 1: particularly when it comes to debt recycling. It's a very 227 00:09:39,080 --> 00:09:41,280 Speaker 1: hot topic right now. And a lot of debt recyclings 228 00:09:41,320 --> 00:09:43,720 Speaker 1: initially set up as an interest only loan. Is there 229 00:09:43,800 --> 00:09:45,720 Speaker 1: much of a difference at the moment between the rates 230 00:09:45,800 --> 00:09:48,600 Speaker 1: charged on interest only versus principal interest? And if there 231 00:09:48,600 --> 00:09:51,200 Speaker 1: is enough savings, is it worth changing from interest only 232 00:09:51,200 --> 00:09:53,680 Speaker 1: loan too principal interest? So at least the debts are 233 00:09:53,880 --> 00:09:58,240 Speaker 1: slowly coming down and you are harbored to a very 234 00:09:58,280 --> 00:10:01,760 Speaker 1: limited degree, but at least some further interest rate rises 235 00:10:01,760 --> 00:10:04,000 Speaker 1: in that you don't have as much debt exposed to 236 00:10:04,480 --> 00:10:05,439 Speaker 1: further rate rises. 237 00:10:05,559 --> 00:10:07,440 Speaker 2: Yeah, that's a tricky one, and there's so much to 238 00:10:07,520 --> 00:10:10,160 Speaker 2: consider in this, and I'll go through all of the reasons. 239 00:10:10,360 --> 00:10:12,640 Speaker 2: The rate difference from principal and interest to interest only 240 00:10:12,720 --> 00:10:15,560 Speaker 2: it's probably around fifteen to twenty basis points across the 241 00:10:15,600 --> 00:10:18,640 Speaker 2: board now when I talk about this debt recycling piece, 242 00:10:18,679 --> 00:10:21,600 Speaker 2: initially with new clients or existing kinds of mine. The 243 00:10:21,640 --> 00:10:25,440 Speaker 2: best example of debt recycling is having surplus cash, say 244 00:10:25,480 --> 00:10:28,040 Speaker 2: fifty thousand, that you can pay your homelan down by 245 00:10:28,200 --> 00:10:30,520 Speaker 2: then you split that fifty thousand dollars into a new 246 00:10:30,520 --> 00:10:33,319 Speaker 2: investment loan and then you reinvest that fifty thousand. That's 247 00:10:33,360 --> 00:10:35,760 Speaker 2: the best purest form of debt recycling. In doing it 248 00:10:35,800 --> 00:10:37,959 Speaker 2: that way, you then keep the same rate as your 249 00:10:37,960 --> 00:10:40,320 Speaker 2: home loan and it's on principle and interest repayments. The 250 00:10:40,360 --> 00:10:44,120 Speaker 2: second example of debt recycling is taking equity out and 251 00:10:44,160 --> 00:10:46,520 Speaker 2: initially in most cases, I would do that as an 252 00:10:46,559 --> 00:10:49,320 Speaker 2: interest only loan, so that because it's new until you 253 00:10:49,400 --> 00:10:51,480 Speaker 2: invest the money, it means you can park those funds 254 00:10:51,480 --> 00:10:53,400 Speaker 2: in the offset account linked to that, so you've got 255 00:10:53,440 --> 00:10:55,280 Speaker 2: no repayments due until you invest it. 256 00:10:55,440 --> 00:10:56,480 Speaker 3: Then it's interest only. 257 00:10:56,679 --> 00:10:58,480 Speaker 2: So ideally, if you can, you want to be paying 258 00:10:58,520 --> 00:11:00,880 Speaker 2: principle and interest on all your deay But that doesn't 259 00:11:00,880 --> 00:11:03,040 Speaker 2: always work, and it's not necessarily a bad thing if 260 00:11:03,040 --> 00:11:04,840 Speaker 2: you've got investment debt that you want to pay interest 261 00:11:04,880 --> 00:11:07,400 Speaker 2: only on. But if you've got the ability to manage 262 00:11:07,440 --> 00:11:10,080 Speaker 2: the extra cost of having principal and interest on your 263 00:11:10,120 --> 00:11:11,880 Speaker 2: investment loans, then yes, do it. 264 00:11:11,920 --> 00:11:14,520 Speaker 1: And I guess you know, working with maybe a financial 265 00:11:14,520 --> 00:11:18,880 Speaker 1: planner an accountant along with it yourself or other mortgage broker. 266 00:11:18,840 --> 00:11:21,520 Speaker 2: But that helps correct but it all comes down to 267 00:11:21,559 --> 00:11:24,760 Speaker 2: individual circumstances. If you've got high cash surplus and you're 268 00:11:24,760 --> 00:11:27,320 Speaker 2: then looking like the first example I gave of using 269 00:11:27,360 --> 00:11:29,640 Speaker 2: fifty thousand in cash that you've got to pay your 270 00:11:29,640 --> 00:11:31,280 Speaker 2: home line down, how long will it be before you 271 00:11:31,320 --> 00:11:33,280 Speaker 2: can do that again? If you can do that every 272 00:11:33,360 --> 00:11:35,160 Speaker 2: twelve months to twenty four months, then maybe it is 273 00:11:35,200 --> 00:11:37,160 Speaker 2: better just leave them as interest only so that you 274 00:11:37,200 --> 00:11:39,720 Speaker 2: can recycle the rest of your home loan as quickly 275 00:11:39,720 --> 00:11:41,920 Speaker 2: as possible. Then once you've done that, you've got no 276 00:11:42,000 --> 00:11:44,440 Speaker 2: more non under the debt debt. Yeah, then you can 277 00:11:44,480 --> 00:11:46,480 Speaker 2: start looking at princeal interests on the other loans or 278 00:11:46,480 --> 00:11:47,800 Speaker 2: whatever that might be for you. 279 00:11:48,000 --> 00:11:50,120 Speaker 1: Okay, So at the end of the day, get advice 280 00:11:50,400 --> 00:11:51,359 Speaker 1: before you start. 281 00:11:51,320 --> 00:11:52,560 Speaker 3: Correct because it making change. 282 00:11:52,600 --> 00:11:54,320 Speaker 2: The opposite is, if you don't have a huge cash 283 00:11:54,320 --> 00:11:56,800 Speaker 2: flow surplus and use taking out equity loans, maybe you 284 00:11:56,840 --> 00:11:58,520 Speaker 2: are better off to just do prince all interest from 285 00:11:58,520 --> 00:12:01,440 Speaker 2: the beginning because you don't have that huge cash flow 286 00:12:01,440 --> 00:12:03,000 Speaker 2: surplus to do the opposite. 287 00:12:03,240 --> 00:12:06,120 Speaker 1: Right, with talks of rates, you know there potentially being 288 00:12:06,240 --> 00:12:09,839 Speaker 1: another rate rise not that far away. Should we be 289 00:12:09,880 --> 00:12:14,520 Speaker 1: getting a lot more aggressive in prioritizing finding those extra payments, 290 00:12:14,679 --> 00:12:17,319 Speaker 1: you know, through doing our budget to try and ultimately 291 00:12:17,360 --> 00:12:20,760 Speaker 1: save more time and money and reduce our own financial stress. 292 00:12:20,880 --> 00:12:23,360 Speaker 1: You know it does. Putting an extra seventy dollars per 293 00:12:23,400 --> 00:12:26,040 Speaker 1: month on a home loan, is it really worth it? 294 00:12:26,280 --> 00:12:26,600 Speaker 3: Yes? 295 00:12:26,720 --> 00:12:29,800 Speaker 2: Well, look, you'd be surprised when you look the term 296 00:12:29,800 --> 00:12:32,120 Speaker 2: of the loan. How paying you know, for example, an 297 00:12:32,160 --> 00:12:35,240 Speaker 2: extra hundred dollars per month, what that can save you 298 00:12:35,440 --> 00:12:36,520 Speaker 2: over the term of your loan. 299 00:12:36,679 --> 00:12:38,120 Speaker 3: Yeah, it is actually huge. 300 00:12:38,160 --> 00:12:42,480 Speaker 1: And you've got some brilliant calculators three on your I'll link. 301 00:12:42,320 --> 00:12:47,559 Speaker 2: Those you As an example, a twenty five basis point 302 00:12:47,720 --> 00:12:50,040 Speaker 2: rate increase on a five hundred thousand dollars more weich 303 00:12:50,120 --> 00:12:53,240 Speaker 2: is about eighty dollars per month increase. So yeah, if 304 00:12:53,280 --> 00:12:55,839 Speaker 2: you're paying that or one hundred and sixty dollars per 305 00:12:55,840 --> 00:12:58,120 Speaker 2: month extra, you know that the rate rise isn't going 306 00:12:58,160 --> 00:13:01,920 Speaker 2: to impact you. Obviously rejuices or increases the time to 307 00:13:02,120 --> 00:13:04,600 Speaker 2: repay a loan, but at least you know you can 308 00:13:04,640 --> 00:13:05,040 Speaker 2: manage it. 309 00:13:05,200 --> 00:13:07,520 Speaker 1: Yeah. Yeah, And that's the thing is a lot of 310 00:13:07,520 --> 00:13:09,959 Speaker 1: financial will being is also about financial resilience as well. 311 00:13:10,040 --> 00:13:10,680 Speaker 3: Yeah, that's true. 312 00:13:10,720 --> 00:13:13,160 Speaker 1: All right. As we wrap up today's episode, for someone 313 00:13:13,200 --> 00:13:16,520 Speaker 1: who hasn't actually reviewed their home loan in years. You know, 314 00:13:16,520 --> 00:13:18,720 Speaker 1: they've maybe let they took it out, say five, six, 315 00:13:18,800 --> 00:13:21,679 Speaker 1: seven years ago, and just have been time board juggling 316 00:13:22,040 --> 00:13:25,080 Speaker 1: work and kids and just the reality of life. How 317 00:13:25,200 --> 00:13:28,079 Speaker 1: much money are they realistically leaving on the table Because 318 00:13:28,080 --> 00:13:29,520 Speaker 1: of this loyalty tax I. 319 00:13:29,400 --> 00:13:31,840 Speaker 2: Speak to a lot of people on a daily basis, 320 00:13:32,080 --> 00:13:34,120 Speaker 2: either referred to me or have seen us on Instagram 321 00:13:34,200 --> 00:13:37,120 Speaker 2: or whatever that might be. And I really do enjoy 322 00:13:37,160 --> 00:13:38,719 Speaker 2: speaking to the people who are on a really good rate, 323 00:13:38,800 --> 00:13:40,200 Speaker 2: and I'm happy to send them on their way and 324 00:13:40,200 --> 00:13:42,160 Speaker 2: say you've got a good rate and maybe higher than 325 00:13:42,160 --> 00:13:44,400 Speaker 2: you'd like, but there's no need to change. You change, 326 00:13:44,440 --> 00:13:47,080 Speaker 2: you're getting costs for changing or refinancing, and you don't 327 00:13:47,080 --> 00:13:48,920 Speaker 2: really get the benefit. So just stick at what you're doing. 328 00:13:49,080 --> 00:13:50,520 Speaker 2: We can talk again in another. 329 00:13:50,320 --> 00:13:50,719 Speaker 3: Year or two. 330 00:13:50,920 --> 00:13:53,280 Speaker 2: At the same time, I've spoken to people as recent 331 00:13:53,520 --> 00:13:56,400 Speaker 2: as three or four weeks ago who had never used 332 00:13:56,400 --> 00:13:58,920 Speaker 2: a broker before, though with the same bank they'd been 333 00:13:58,960 --> 00:14:02,559 Speaker 2: with since they left school. No, they had a nine 334 00:14:02,640 --> 00:14:05,600 Speaker 2: hundred thousand dollar mortgage and we're paying almost one percent 335 00:14:05,720 --> 00:14:08,439 Speaker 2: high the market rate. There's almost ten grand a year 336 00:14:08,480 --> 00:14:09,559 Speaker 2: that we've saved them, and that. 337 00:14:09,640 --> 00:14:11,160 Speaker 3: Was just I'd be loving you right now. It was 338 00:14:11,200 --> 00:14:11,880 Speaker 3: just behavior. 339 00:14:11,920 --> 00:14:14,440 Speaker 2: You know, it's a behavior and a relationship issue with 340 00:14:14,440 --> 00:14:16,720 Speaker 2: the bank, a loyalty issue. And you know, similar to 341 00:14:16,760 --> 00:14:18,760 Speaker 2: what we touched on earlier about calling your bank for 342 00:14:18,760 --> 00:14:21,120 Speaker 2: a better rate, they won't call you in that situation 343 00:14:21,200 --> 00:14:23,440 Speaker 2: of that example, you know, they didn't call that customer. 344 00:14:23,440 --> 00:14:25,920 Speaker 2: So you've been with us since you were eighteen, we've 345 00:14:25,920 --> 00:14:28,600 Speaker 2: realized that you're one percent higher than market rates. 346 00:14:28,640 --> 00:14:29,320 Speaker 3: They don't do that. 347 00:14:29,400 --> 00:14:32,360 Speaker 1: They'll just sit there silently. For stealing your money. 348 00:14:32,440 --> 00:14:35,200 Speaker 2: Of course, that's a huge saving, so you'll always review it, 349 00:14:35,280 --> 00:14:37,160 Speaker 2: get in touch, happy to give you know, we give 350 00:14:37,280 --> 00:14:39,720 Speaker 2: free mortgage health checks as well. So happy to speak 351 00:14:39,760 --> 00:14:41,680 Speaker 2: to anyone and everyone to see what we can do 352 00:14:41,680 --> 00:14:42,000 Speaker 2: to help. 353 00:14:42,200 --> 00:14:44,520 Speaker 1: All right, on that note of being people being time poor, 354 00:14:44,600 --> 00:14:48,360 Speaker 1: juggling work, juggling kids, juggling, you know, the hectic reality 355 00:14:48,360 --> 00:14:50,880 Speaker 1: of life, and everyone's just you know, I think hustling 356 00:14:50,920 --> 00:14:53,560 Speaker 1: really hard at the moment to try and keep afloat. 357 00:14:53,760 --> 00:14:55,600 Speaker 1: How do you step in and help people when it 358 00:14:55,600 --> 00:14:57,720 Speaker 1: comes to their not just their home loans, but of 359 00:14:57,800 --> 00:15:01,520 Speaker 1: course like in debt recycling, invest borrow, money to invest, 360 00:15:01,560 --> 00:15:03,880 Speaker 1: say to build up a property portfolio, or even when 361 00:15:03,880 --> 00:15:07,040 Speaker 1: it comes to debt consolidation, when you own a home, 362 00:15:07,160 --> 00:15:08,920 Speaker 1: you know, if you've got some credit card debt, that's 363 00:15:08,960 --> 00:15:11,480 Speaker 1: crept personal loans that need to be actually look at 364 00:15:11,480 --> 00:15:13,480 Speaker 1: consolidation like how do you work and how do you 365 00:15:13,480 --> 00:15:15,920 Speaker 1: step in, and how do you like to work with clients? 366 00:15:16,120 --> 00:15:18,360 Speaker 2: Well, first and foremost we like to do all the 367 00:15:18,360 --> 00:15:20,560 Speaker 2: heavy lifting. But I say that we can only do 368 00:15:20,640 --> 00:15:23,560 Speaker 2: that once know any new client has done some initial 369 00:15:23,600 --> 00:15:26,400 Speaker 2: work first. We can't do it without understanding who they are, 370 00:15:26,600 --> 00:15:31,120 Speaker 2: their situation, evidence and documentation about their income and expenses 371 00:15:31,160 --> 00:15:33,240 Speaker 2: and debt. So all we ask is just a bit 372 00:15:33,280 --> 00:15:35,800 Speaker 2: of effort up front. We make that as easy and 373 00:15:35,800 --> 00:15:38,360 Speaker 2: seamless as possible with online portals so it can be 374 00:15:38,360 --> 00:15:40,560 Speaker 2: down on your phone, your laptop, so that's all. You know, 375 00:15:40,560 --> 00:15:42,720 Speaker 2: there's a lot of good technology there to really help 376 00:15:42,760 --> 00:15:44,480 Speaker 2: with that, and then it just comes to us. We 377 00:15:44,520 --> 00:15:46,680 Speaker 2: then do all the heavy lifting, the modeling, and then 378 00:15:46,800 --> 00:15:49,480 Speaker 2: communicate with you as much as possible to talk through 379 00:15:49,480 --> 00:15:52,200 Speaker 2: those options and what's available, and then go away and 380 00:15:52,240 --> 00:15:55,640 Speaker 2: implement that so that basically, after you've done the initial 381 00:15:55,720 --> 00:15:57,880 Speaker 2: sort of data entry, and telling us about who you 382 00:15:57,920 --> 00:16:00,120 Speaker 2: are and what you need and your goals everything, and 383 00:16:00,160 --> 00:16:03,480 Speaker 2: that point is generally now you know, electronic signatures, a 384 00:16:03,600 --> 00:16:05,960 Speaker 2: phone call, an email, there's not a lot and once 385 00:16:05,960 --> 00:16:07,960 Speaker 2: you're a client of ours, you've been on boarded. So 386 00:16:08,000 --> 00:16:09,640 Speaker 2: from there on it's sort of a one not a 387 00:16:09,680 --> 00:16:11,720 Speaker 2: one off. But for the most part, once we know 388 00:16:11,760 --> 00:16:14,520 Speaker 2: who you are or on that journey with you, so 389 00:16:14,880 --> 00:16:17,000 Speaker 2: it's just about updating a few details here and there 390 00:16:17,000 --> 00:16:19,520 Speaker 2: as they change, still getting information that we need to 391 00:16:19,560 --> 00:16:22,080 Speaker 2: undertand who you are or your situation. But from there 392 00:16:22,120 --> 00:16:24,040 Speaker 2: it's all we like to do all the heavy lifting 393 00:16:24,080 --> 00:16:28,480 Speaker 2: and give you guidance and comfort and evidence that everything 394 00:16:28,560 --> 00:16:29,000 Speaker 2: is working. 395 00:16:29,320 --> 00:16:30,680 Speaker 1: Okay, I'm going to put you on the spot and 396 00:16:30,720 --> 00:16:33,000 Speaker 1: ask you one last question. What is the most amount 397 00:16:33,000 --> 00:16:36,600 Speaker 1: of money you've ever saved someone, either upfront or ongoing 398 00:16:37,200 --> 00:16:39,520 Speaker 1: since starting this twenty years ago. 399 00:16:39,680 --> 00:16:43,320 Speaker 2: It's actually scary because I know, I remember the exact client. 400 00:16:43,360 --> 00:16:45,680 Speaker 2: I remember where I was sitting. It was in an 401 00:16:45,680 --> 00:16:48,440 Speaker 2: office in Double Bay after I'd left a job where 402 00:16:48,440 --> 00:16:50,120 Speaker 2: you and I had worked together for a long time, 403 00:16:50,680 --> 00:16:54,480 Speaker 2: and it was just post GFC, and you know this 404 00:16:54,560 --> 00:16:56,960 Speaker 2: client was with a major bank, had an eight million 405 00:16:57,000 --> 00:17:00,720 Speaker 2: dollar mortgage. Wow, and yeah, they'll be when there was 406 00:17:00,760 --> 00:17:04,040 Speaker 2: a lot of changes around, you know, particular lenders that 407 00:17:04,160 --> 00:17:07,360 Speaker 2: were essentially telling customers that they didn't want their business anymore. 408 00:17:07,400 --> 00:17:10,359 Speaker 2: And we did a refinance and got this customer out 409 00:17:10,359 --> 00:17:12,840 Speaker 2: of that situation. And oh, look, I've got to say, 410 00:17:12,840 --> 00:17:14,840 Speaker 2: I think they were saving one hundred thousand a year 411 00:17:14,960 --> 00:17:17,600 Speaker 2: or something. It was such a big loan and they 412 00:17:17,600 --> 00:17:20,480 Speaker 2: were being taken advantage of in a way, but also 413 00:17:20,520 --> 00:17:22,440 Speaker 2: being asked to leave the bank as well, in which 414 00:17:22,480 --> 00:17:24,040 Speaker 2: if they weren't able to leave the bank, they were 415 00:17:24,119 --> 00:17:26,119 Speaker 2: going to be forced to sell. So we're able to 416 00:17:26,440 --> 00:17:28,359 Speaker 2: move them to a new lender and look after them 417 00:17:28,400 --> 00:17:29,879 Speaker 2: and save them a ton of money. 418 00:17:29,920 --> 00:17:31,080 Speaker 3: But that's really rare. 419 00:17:31,600 --> 00:17:33,480 Speaker 1: But still, that's really that's nice. 420 00:17:33,560 --> 00:17:35,320 Speaker 3: Yeah, it was all right. 421 00:17:35,359 --> 00:17:38,040 Speaker 1: Thank you Adam so much for obviously allowing me to 422 00:17:38,080 --> 00:17:40,399 Speaker 1: pick your brain as I do on a regular basis, 423 00:17:40,440 --> 00:17:42,639 Speaker 1: and for sharing all of your insights to your knowledge 424 00:17:42,680 --> 00:17:45,159 Speaker 1: and also a lot of your just professional experience in 425 00:17:45,200 --> 00:17:47,680 Speaker 1: this industry. So if anyone is listening to Adam thinking 426 00:17:47,840 --> 00:17:49,760 Speaker 1: I need to speak to Adam Money to ask him 427 00:17:49,920 --> 00:17:52,320 Speaker 1: about my home loan, whether I'm on a great Raidar, 428 00:17:52,359 --> 00:17:54,680 Speaker 1: whether it's some options available for me to help pay 429 00:17:54,720 --> 00:17:56,960 Speaker 1: off my homeland sooner. I will link in the podcast 430 00:17:57,000 --> 00:17:59,960 Speaker 1: notes Adam's contact details so you can reach out directly 431 00:18:00,200 --> 00:18:03,520 Speaker 1: to him and have your own personal private chat. All right, everyone, 432 00:18:03,520 --> 00:18:05,720 Speaker 1: thank you so much for listening today's episode. I will 433 00:18:05,760 --> 00:18:08,760 Speaker 1: reconnect with you again on Friday morning as part of 434 00:18:09,160 --> 00:18:12,880 Speaker 1: Start Here, the special mini series within sugarmumas Fireplay of course, 435 00:18:12,920 --> 00:18:14,880 Speaker 1: where you get to ask me your real life money 436 00:18:14,960 --> 00:18:17,159 Speaker 1: questions and I get to answer them back, giving you 437 00:18:17,240 --> 00:18:21,160 Speaker 1: practical empowering solutions, strategies and ideas so that you can 438 00:18:21,240 --> 00:18:24,280 Speaker 1: get started and moving in the right direction. All right, 439 00:18:24,440 --> 00:18:26,040 Speaker 1: enjoy your week, everyone, Chat soon.