WEBVTT - How to prepare for your mortgage cliff 0:00:07.930 --> 0:00:10.120 Hello and welcome to It All Adds Up the podcast 0:00:10.119 --> 0:00:12.040 where we chat about money, how to get it, how 0:00:12.039 --> 0:00:14.200 to spend it and how to invest it. I'm money 0:00:14.200 --> 0:00:16.300 editor of the Sydney Morning Herald and The Age newspaper's 0:00:16.300 --> 0:00:16.790 Dom Powell . 0:00:16.810 --> 0:00:20.350 And I'm senior economics writer Jess Irvine. And this week, 0:00:20.350 --> 0:00:24.940 we're continuing our special series, focusing on real life budgets 0:00:25.150 --> 0:00:28.300 and how you're tackling the rising cost of living. 0:00:28.720 --> 0:00:31.720 Yes. And last week we had a lovely question from Jewel, 0:00:31.720 --> 0:00:33.879 our first caller in to the podcast, if you can 0:00:33.880 --> 0:00:36.159 really call into a podcast. And she had some questions 0:00:36.159 --> 0:00:39.220 about affording her first home. And this week we've got 0:00:39.220 --> 0:00:42.640 a question from listener Clare, who was facing some pretty 0:00:42.640 --> 0:00:45.370 steep rises on her cost of living and a mortgage 0:00:45.370 --> 0:00:47.890 cliff like so many of us are. So let's have 0:00:47.890 --> 0:00:49.540 a listen to what Claire has to say. 0:00:51.820 --> 0:00:55.510 Hi, Jason. I'm Claire. I'm a single mom of a 0:00:55.510 --> 0:00:59.590 five month old. I work full time. I'm on maternity 0:00:59.590 --> 0:01:03.250 leave at the moment. And I just wanted your thoughts 0:01:03.250 --> 0:01:06.460 and ideas on where I'm at with my budget. So 0:01:06.940 --> 0:01:13.090 I've recently paid off a $5,500 loan that I use 0:01:13.090 --> 0:01:17.980 to pursue IVF. I'll have childcare costs when I go 0:01:17.980 --> 0:01:22.080 back to work for my little one in April or May, 0:01:22.090 --> 0:01:26.470 so I'll need to start paying for childcare. And I 0:01:26.470 --> 0:01:33.640 also come off my low interest fixed mortgage of 1.89% 0:01:33.640 --> 0:01:40.150 for my apartment. It's a loan of about $600,000 in September. 0:01:40.160 --> 0:01:42.399 So I've got these changes coming up and I just 0:01:42.400 --> 0:01:47.680 really appreciate your thoughts and reflections or any insights. And yeah, 0:01:47.680 --> 0:01:50.140 thanks very much for your work on the podcast so far. 0:01:51.550 --> 0:01:54.730 Thanks for that, Claire. And yes, ouch. Couple of sort 0:01:54.730 --> 0:01:58.180 of big costs that are coming in there. Obviously, child care, 0:01:58.570 --> 0:02:01.720 a pretty big one and coming off a very low rate. 0:02:01.720 --> 0:02:04.630 1.89 is super low. So that will be a very 0:02:04.630 --> 0:02:08.890 big switch once she rolls off her mortgage. Just you've 0:02:08.889 --> 0:02:11.530 got to look at Claire's budget. What do you think? 0:02:11.950 --> 0:02:15.010 Yeah, I think it is very similar to my own budget, 0:02:15.040 --> 0:02:17.530 not least of all because she uses my money with 0:02:17.530 --> 0:02:21.640 just a tracking system. But yes. Yeah. Same situation of 0:02:21.639 --> 0:02:25.329 being a single parent with a mortgage of about that size. 0:02:25.570 --> 0:02:31.060 I locked in at 1.84% for two years, so I 0:02:31.060 --> 0:02:35.290 hit my mortgage cliff on June 30. And to be honest, 0:02:35.290 --> 0:02:38.169 I feel a little bit uncomfortable knowing, planned and prepared 0:02:38.169 --> 0:02:41.440 for it. But it's just this very uncomfortable feeling of 0:02:41.440 --> 0:02:44.050 staring down the barrel of that mortgage. Cliff And Adam, 0:02:44.050 --> 0:02:45.880 I think you fixed in as well did Yeah. 0:02:45.880 --> 0:02:50.560 I'm I'm slightly worse I'm at 2.79 but I've got 0:02:50.560 --> 0:02:53.560 that until April 2024. So I'm really hoping that by 0:02:53.560 --> 0:02:56.080 that point that Phil Lowe starts to think about putting 0:02:56.080 --> 0:02:59.680 interest rates back down again. But that's me being incredibly optimistic. 0:03:00.220 --> 0:03:02.140 Yeah, well, I mean, that is that is of what 0:03:02.139 --> 0:03:04.240 the sort of market pricing is, is for rates to 0:03:04.240 --> 0:03:06.340 sort of hit the roof this year and then come 0:03:06.340 --> 0:03:09.280 back down again next year. But who knows really what 0:03:09.280 --> 0:03:11.680 will happen. But yeah, I did have a good look 0:03:11.680 --> 0:03:14.890 through Claire's spreadsheets and worksheets that she sent me. And 0:03:14.889 --> 0:03:17.350 first of all, she's doing an amazing job. And I 0:03:17.350 --> 0:03:21.369 think if anybody's in the situation of facing the mortgage cliff, 0:03:21.880 --> 0:03:23.820 the best thing you can be doing is, you know, 0:03:23.830 --> 0:03:26.649 having visibility around where your money is going and tracking 0:03:26.650 --> 0:03:28.240 it in some way and not just putting your head 0:03:28.240 --> 0:03:32.770 in the sand and sort of just hoping for the best. So, yes, 0:03:32.770 --> 0:03:34.930 I mean, the good thing for Claire is that she 0:03:34.930 --> 0:03:38.860 has that full time permanent job in a relatively sheltered 0:03:38.860 --> 0:03:41.770 or a sector that shouldn't be too affected. If we 0:03:41.770 --> 0:03:44.620 do hit some harder times that she will return to 0:03:44.620 --> 0:03:48.130 when she's finished on her parental leave. I did look 0:03:48.130 --> 0:03:54.070 through and she was prior to the leave making extra 0:03:54.070 --> 0:03:57.070 repayments on the mortgage. So many people will find that 0:03:57.070 --> 0:04:00.340 they are ahead of what they work, their minimum repayments, 0:04:00.340 --> 0:04:03.250 you know, that they were paying in. So there is 0:04:03.250 --> 0:04:06.100 about a $1,000 per month buffer there that she was 0:04:06.100 --> 0:04:08.980 chipping in. So, you know, and we'll go through the 0:04:08.980 --> 0:04:12.309 figures later, but that might be about what she's required 0:04:12.310 --> 0:04:16.150 to pay extra in interest per month anyway. You know 0:04:16.150 --> 0:04:18.790 she's got this great savings history of paying off that 0:04:18.790 --> 0:04:22.270 IVF loan. So it does look like Claire is running 0:04:22.270 --> 0:04:25.390 herself a surplus. So she's she's able to save money 0:04:25.750 --> 0:04:29.290 and she's also provisioning in her budget for the big 0:04:29.290 --> 0:04:33.580 surprise expenses that hit people like car expenses, strata fees. 0:04:33.970 --> 0:04:37.660 She's putting aside monthly amounts for that, which I love 0:04:37.660 --> 0:04:41.710 to see in budgets. People sort of anticipating those big expenses. 0:04:42.460 --> 0:04:47.440 But yeah, there's definitely some huge costs that she's staring 0:04:47.440 --> 0:04:52.750 down the barrel of child care thing. One in particular. 0:04:52.750 --> 0:04:55.210 Yes. I mean, I had to look at the budgets 0:04:55.210 --> 0:04:58.390 as well and put mine to shame, I'd just like 0:04:58.390 --> 0:05:00.549 to say. But it doesn't take much to put mine 0:05:00.550 --> 0:05:01.510 to shame. So, you. 0:05:01.510 --> 0:05:02.529 Know, no shade. But, you. 0:05:02.860 --> 0:05:05.380 Know, it's it's shame. It's allowed to be shame. It's 0:05:05.380 --> 0:05:07.720 all right. But no, I was very impressed. But I 0:05:07.720 --> 0:05:10.330 did think that, yes, you know, she doing a great 0:05:10.330 --> 0:05:12.760 job in provisioning for everything that sort of, you know, 0:05:12.760 --> 0:05:14.440 life can throw at you. She had sort of, I think, 0:05:14.440 --> 0:05:18.010 for different little sort of Future Fund savers for for 0:05:18.010 --> 0:05:21.010 various different things, which I think is great. But yes, 0:05:21.010 --> 0:05:23.740 you're right. Childcare costs a big one. 0:05:24.160 --> 0:05:28.480 Yeah. Look, it's massive. And I think overall, you know, 0:05:28.660 --> 0:05:31.570 when we're hitting the mortgage cliff and the childcare costs 0:05:31.570 --> 0:05:35.500 at the same time, this is going to really stress 0:05:35.500 --> 0:05:39.760 the budget. Oh my gosh. Are so my child is 0:05:39.760 --> 0:05:42.969 now eight. Back in the day, you know, he went 0:05:42.970 --> 0:05:45.789 to daycare sort of. And when he was less than 0:05:45.790 --> 0:05:48.190 one and we were there for a couple of years 0:05:48.190 --> 0:05:52.450 and we were paying for long daycare center in the 0:05:52.630 --> 0:05:59.140 inner CBD and I think it was about $150 per day. Wow. Oh, really? Yes. Oh, 0:05:59.140 --> 0:06:02.290 my gosh. Which there is. The government has a childcare subsidy, 0:06:02.290 --> 0:06:04.900 which has changed since I was there. We used to 0:06:04.900 --> 0:06:07.630 have this situation where we'd maxed out the subsidy and 0:06:07.630 --> 0:06:11.380 then we would be paying full freight for a for 0:06:11.380 --> 0:06:13.990 a couple of months of the year. That's sort of 0:06:13.990 --> 0:06:17.140 since been rejigged. But yeah, that is not uncommon and 0:06:17.140 --> 0:06:20.260 I expect it is much higher and probably creeping towards 0:06:20.260 --> 0:06:24.880 the $200 per day for some of those CBD long 0:06:24.880 --> 0:06:27.300 care where you can go from sort of 7 a.m. 0:06:27.300 --> 0:06:30.580 to 6 p.m. or whatever those those hours are. So 0:06:30.730 --> 0:06:32.469 and you're not allowed to pay for just a little 0:06:32.470 --> 0:06:34.330 bit of the day, you just need a few hours, 0:06:34.330 --> 0:06:36.609 you pay for the full day and you pay for 0:06:36.610 --> 0:06:39.849 the days when your child is sick and actually unable 0:06:39.850 --> 0:06:43.420 to attend the centre and you are unable to work. 0:06:43.420 --> 0:06:45.490 And yes, there are a lot of those days because 0:06:45.490 --> 0:06:47.349 kids go to daycare and they get sick all the 0:06:47.350 --> 0:06:51.429 time and then they make you sick, so. Just sort 0:06:51.430 --> 0:06:55.450 of to put a little word of warning out there 0:06:55.450 --> 0:06:57.670 for Clare and others who were sort of in. It's 0:06:57.670 --> 0:07:00.880 a really tough time to navigate and it's a time 0:07:00.880 --> 0:07:03.799 when it's probably going to be hard to save much money. 0:07:03.820 --> 0:07:07.090 You're sort of treading water just to afford those those 0:07:07.089 --> 0:07:11.820 childcare costs. So in terms of preparing for that, you know, 0:07:12.050 --> 0:07:14.890 you know, actually finding a place is a whole other thing. 0:07:14.890 --> 0:07:19.660 And I presume Clare is, you know, researching that, making 0:07:19.660 --> 0:07:22.360 sure that you're registered for the childcare subsidy and having 0:07:22.360 --> 0:07:25.960 some understanding of what you can get back on those costs. 0:07:26.200 --> 0:07:29.500 Yeah. So for anyone who isn't aware, your family, if 0:07:29.500 --> 0:07:33.790 your family incomes between zero to around $70,000, your childcare 0:07:33.790 --> 0:07:41.860 subsidy percentage is 85%. But if you're over 72000 to 177000, 0:07:42.160 --> 0:07:46.630 it's between 85 and 50% your subsidy and it goes 0:07:46.630 --> 0:07:50.770 down by 1% for every $3,000 worth of income that 0:07:50.770 --> 0:07:54.070 your family earns. So it's sort of I guess it's staged, 0:07:54.220 --> 0:07:56.300 you know, for those higher income earners. 0:07:56.320 --> 0:08:00.370 Yeah. And that should increase from July one, I think 0:08:00.370 --> 0:08:03.850 it is. The Labor Government has announced some changes to 0:08:03.880 --> 0:08:07.840 that as well to make it slightly more generous for people. 0:08:07.840 --> 0:08:10.780 But those are the current rates that apply and it's 0:08:10.780 --> 0:08:14.560 not hugely more generous, although I get some billions of 0:08:14.560 --> 0:08:16.420 dollars in aggregate and it's. 0:08:16.420 --> 0:08:17.860 Still not it's still not free. 0:08:18.370 --> 0:08:21.130 It's still not free. There is a review of there's 0:08:21.130 --> 0:08:24.370 a Productivity Commission review and there's an early years strategy. 0:08:24.700 --> 0:08:27.820 And there's a really compelling argument that spending taxpayer money 0:08:27.820 --> 0:08:30.550 in this area yields benefits, you know, and higher taxes 0:08:30.550 --> 0:08:34.060 in the future because you get good child outcomes from 0:08:34.330 --> 0:08:39.610 at least some exposure to that early learning environment. So yeah, 0:08:39.640 --> 0:08:42.730 unfortunately at the moment it's still expensive. We haven't made 0:08:42.730 --> 0:08:45.819 it easy for families and yeah, for Clare to sort 0:08:45.820 --> 0:08:48.270 of be looking at how many days she's going in 0:08:48.270 --> 0:08:50.650 and what the price is and what the potential subsidy 0:08:51.309 --> 0:08:53.530 is and trying to figure out how that fits into 0:08:53.530 --> 0:08:57.280 the budget. That's something to definitely try and get ahead of, 0:08:57.280 --> 0:08:58.990 at least in a planning sense. Yeah. 0:08:59.260 --> 0:09:01.060 Absolutely. And that might mean that she has to put 0:09:01.059 --> 0:09:03.040 a little less into those sort of, you know, Future 0:09:03.040 --> 0:09:05.170 Fund savers that we were talking about, maybe to sort 0:09:05.170 --> 0:09:07.390 of scale those down a bit. So you're not contributing 0:09:07.390 --> 0:09:10.570 nothing but you contributing, you know, maybe 50 bucks less, 0:09:10.570 --> 0:09:11.560 each sort of thing. 0:09:11.559 --> 0:09:14.920 And then particularly on the more discretionary ones, like a holiday, 0:09:15.010 --> 0:09:17.110 she's got a holiday fund. Some of the ones like, 0:09:17.140 --> 0:09:21.699 you know, strata fees. Yeah, unfortunately. But yeah, we'll get 0:09:21.700 --> 0:09:24.190 to some of the nice things that might have to 0:09:24.190 --> 0:09:28.449 go at the end. But yeah, let's get to the mortgage. 0:09:28.450 --> 0:09:31.689 So this is the one that, you know, we're both 0:09:31.690 --> 0:09:35.980 facing down, although mine's a little bit more imminent. So 0:09:35.980 --> 0:09:37.870 what do you think's going to happen to interest rates? 0:09:37.980 --> 0:09:40.090 Oh, is that, is that the million dollar question? Is 0:09:40.090 --> 0:09:43.359 this where I get to become Phil Lowe successor? I mean. 0:09:43.390 --> 0:09:46.270 It's about the sort of $1,000 per tax on the 0:09:46.270 --> 0:09:46.910 average mortgage. 0:09:46.960 --> 0:09:48.880 Really? Well, funnily enough, so I was looking the other 0:09:48.880 --> 0:09:50.770 day because I was thinking about what my interest rates 0:09:50.770 --> 0:09:53.290 might be looking like once I get off my loan. 0:09:53.290 --> 0:09:57.559 And right now I was it's looking like something like 6.2% 0:09:58.450 --> 0:10:01.300 on like an average variable interest rate, which is crazy. 0:10:01.300 --> 0:10:03.700 Like that's, that's more than double what I'm on at 0:10:03.700 --> 0:10:06.610 the moment. I mean, I've got until April 20, 24. 0:10:06.610 --> 0:10:09.430 I'm crossing my fingers and toes to hope that things 0:10:09.429 --> 0:10:11.770 start to look a little bit sort of calmer then, 0:10:11.770 --> 0:10:13.320 and I might be able to get on to a 0:10:13.900 --> 0:10:15.520 maybe a four. 0:10:15.520 --> 0:10:16.150 Ish. 0:10:16.150 --> 0:10:17.920 Four or five ish percent. 0:10:18.610 --> 0:10:19.300 You can dream. 0:10:19.300 --> 0:10:22.000 I will dream. And I do dream every night of 0:10:22.000 --> 0:10:24.410 a 4.4 to 5% interest rate. 0:10:24.429 --> 0:10:27.400 Yeah, I can. So I'm fixed, but I have a 0:10:27.400 --> 0:10:31.210 small proportion of my loan on variable, but it's where 0:10:31.210 --> 0:10:34.030 I park my emergency fund, so it's completely offset and 0:10:34.030 --> 0:10:35.980 I don't actually incur the interest, but I'm able to 0:10:35.980 --> 0:10:38.589 check in and go, what is the sort of variable 0:10:38.590 --> 0:10:40.510 rate of interest that my bank is charging and that 0:10:40.510 --> 0:10:46.330 I'm likely to revert to? And it's currently 5.74% depending 0:10:46.330 --> 0:10:48.760 when you're listening to this. We're expecting at least another 0:10:48.760 --> 0:10:52.449 one or two more rises. So they're likely to revert 0:10:52.450 --> 0:10:57.280 me to something with a six plus percent from a 1.84. 0:10:57.580 --> 0:10:59.830 This is what Claire can expect as well. When we 0:10:59.830 --> 0:11:02.140 come around to September, she's probably going to be looking 0:11:02.140 --> 0:11:06.340 at a six point something interest rate, which, you know, 0:11:06.340 --> 0:11:08.710 is three times the amount that she was on, which 0:11:08.710 --> 0:11:12.730 is a massive, massive increase. So like, I think we've 0:11:12.730 --> 0:11:15.370 done some calculations or you've done some calculations just in 0:11:15.370 --> 0:11:17.920 terms like what's what's that sort of increase a month 0:11:17.920 --> 0:11:18.550 looking like? 0:11:18.730 --> 0:11:20.650 Yeah. If you really want to freak yourself out or 0:11:21.040 --> 0:11:23.920 get prepared for this or do both at the same time, 0:11:24.130 --> 0:11:27.940 I'm Google Money Smart mortgage calculator and it has a 0:11:27.940 --> 0:11:30.400 handy little tool there where you put in how big 0:11:30.400 --> 0:11:33.339 your home loan is, your current rate. You know, if 0:11:33.340 --> 0:11:35.800 you're on a 25 or 30 year term and it 0:11:35.800 --> 0:11:38.199 spits out your monthly repayments so you can have a 0:11:38.200 --> 0:11:42.580 little bit of a play. And currently Claire's looking she's 0:11:42.580 --> 0:11:47.650 probably paying about 2200 per month on her mortgage, the 0:11:47.650 --> 0:11:51.640 minimum sort of required that would be if. It rolls 0:11:51.640 --> 0:11:55.360 off to a 6% interest rate that rises to about 0:11:55.360 --> 0:12:01.960 $3,600 and she'll be needing to find an extra $1,400 0:12:02.020 --> 0:12:02.980 per month. 0:12:03.130 --> 0:12:03.819 That's a lot of dough. 0:12:04.480 --> 0:12:06.760 At the same time that you've got the childcare costs 0:12:07.150 --> 0:12:11.050 kicking in. So you know, who knows, by September, that's 0:12:11.050 --> 0:12:15.760 when she is rolling off. Having said that, you know, 0:12:15.850 --> 0:12:18.760 the 6% and the sort of, you know, what I'm 0:12:18.760 --> 0:12:22.000 on is sort of the it's the sort of top 0:12:22.000 --> 0:12:24.460 shelf or it's the one that they put you on 0:12:24.460 --> 0:12:27.790 if you've been a loyal customer for a while. It's 0:12:27.790 --> 0:12:30.520 not the really great new rates that you can get 0:12:30.520 --> 0:12:33.100 by being a new customer. And one of the it's 0:12:33.100 --> 0:12:35.080 not an endorsement, but I do like to check the 0:12:35.080 --> 0:12:40.450 website of Tick Tock loans. TikTok. Not the dancing app. 0:12:40.929 --> 0:12:43.179 Not the dancing app. I like to check that one too. 0:12:43.750 --> 0:12:47.620 But Tick Tock is currently advertising an interest rate of 0:12:47.860 --> 0:12:53.800 variable of 4.56. So that's compared to my variable rate 0:12:53.800 --> 0:12:57.490 of 5.74, which is about 1.2 percentage points cheaper. Yeah. 0:12:57.520 --> 0:13:00.700 So there are better deals. And if you particularly if 0:13:00.700 --> 0:13:03.550 you are locked in with one of the bigger lenders, 0:13:04.030 --> 0:13:05.770 just be aware that they're probably going to pop you 0:13:05.770 --> 0:13:08.380 on a right that is not competitive and it is 0:13:08.380 --> 0:13:10.600 definitely time to be shopping around. 0:13:11.900 --> 0:13:13.910 My current homeland is with one of the sort of 0:13:13.910 --> 0:13:16.760 the newer lenders, the neo bank lenders, so to speak. 0:13:17.059 --> 0:13:19.579 And yeah, they're great because they don't have the overheads 0:13:19.580 --> 0:13:21.620 that the other banks do. So they can offer these 0:13:21.620 --> 0:13:25.370 really competitive rates, but they also can and like everyone's 0:13:25.370 --> 0:13:27.800 doing this because I don't know if anyone's been reading 0:13:28.120 --> 0:13:31.700 the finance reports from the banks this week. This is 0:13:31.700 --> 0:13:34.370 very business journalist, nerdy business journalist thing to do. But 0:13:34.370 --> 0:13:37.820 apparently the mortgage market is incredibly competitive. They've been. The 0:13:37.820 --> 0:13:40.459 Bendigo Bank CEO said that it was like crazy, like 0:13:40.460 --> 0:13:42.740 she was like, I've never seen anything like this. So 0:13:43.190 --> 0:13:45.780 there are banks are out there, they are desperate for 0:13:45.800 --> 0:13:48.620 a business and they are giving big fat cashbacks like 0:13:48.620 --> 0:13:53.090 just obscenely high, like five $6,000 in some cases. So 0:13:53.090 --> 0:13:56.030 this is something else to think about when you're refinancing, 0:13:56.030 --> 0:13:58.489 which may well be that not only can you sort 0:13:58.490 --> 0:14:00.110 of go to one of these sort of smaller lenders 0:14:00.110 --> 0:14:01.579 that might be able to give you a competitive right, 0:14:01.910 --> 0:14:04.220 but they're also then going to give you five grand 0:14:04.250 --> 0:14:04.670 as well? 0:14:05.030 --> 0:14:08.480 Yeah, if you can handle all the paperwork involved, if 0:14:08.480 --> 0:14:11.569 you switched every six months, you could offset the impact 0:14:11.570 --> 0:14:14.300 of the higher rates by sort of getting those juicy cashbacks, 0:14:14.570 --> 0:14:17.300 although that may affect your credit rating, that you might 0:14:17.300 --> 0:14:19.620 not be able to play that card too many times. Yeah. 0:14:19.620 --> 0:14:23.660 And with the the neobanks or the smaller lenders, it 0:14:23.660 --> 0:14:27.050 can be a little bit more tricky if you're self-employed 0:14:27.050 --> 0:14:29.630 or you've got sort of circumstances where you can't just 0:14:29.630 --> 0:14:33.350 immediately lodge the payslip to show easily he's the income. 0:14:33.770 --> 0:14:36.350 So it's not an option for everyone. But if you 0:14:36.350 --> 0:14:39.590 do sort of have the income, you can substantiate quite clearly. 0:14:39.800 --> 0:14:43.190 And importantly, if you've got enough equity in your home, 0:14:43.460 --> 0:14:45.950 which is something we might mention as well for the 0:14:45.950 --> 0:14:48.920 mortgage prisoners out there. Do you want to explain what 0:14:48.920 --> 0:14:49.810 a mortgage prisoners? 0:14:51.030 --> 0:14:54.170 Yes. So, I mean, you considered a very dramatic term, 0:14:54.170 --> 0:14:56.930 but you're considered a mortgage prisoner if your equity in 0:14:56.930 --> 0:14:59.720 your home has fallen below 20%, so it might not 0:14:59.720 --> 0:15:02.420 of it might have been above 20% initially when you 0:15:02.420 --> 0:15:04.220 bought the place, but the value of the property might 0:15:04.220 --> 0:15:06.830 have dropped or or anything you might have happened and 0:15:06.830 --> 0:15:10.070 it's fallen below that 20%. So you now face lenders 0:15:10.070 --> 0:15:13.670 mortgage insurance if you refinance, which means the whole sort 0:15:13.670 --> 0:15:17.390 of process of refinancing becomes more expensive when the whole 0:15:17.390 --> 0:15:19.790 idea is that it's supposed to be cheaper. So it 0:15:19.790 --> 0:15:24.170 becomes sort of like financially unviable to leave your your mortgage, Right. 0:15:24.170 --> 0:15:25.670 So therefore, you sort of trapped in it. 0:15:25.700 --> 0:15:27.650 Yeah. I mean, and you can if the savings on 0:15:27.650 --> 0:15:29.990 the interest was going to be very substantial, it might 0:15:29.990 --> 0:15:32.570 be worth paying the lender's mortgage insurance, which can sort 0:15:32.570 --> 0:15:35.690 of be amortized into your payments across the the length 0:15:35.690 --> 0:15:39.110 of the loan in some cases. So it's worth investigating. 0:15:39.110 --> 0:15:40.590 It's going to be a bit tricky. You know, I 0:15:40.610 --> 0:15:43.010 would say reach out to a mortgage broker or just 0:15:43.010 --> 0:15:45.590 walk into a bank in like we did in the 0:15:45.590 --> 0:15:48.830 olden days and have a chat about what your options 0:15:48.830 --> 0:15:51.770 are and start to have that chat. I would say 0:15:51.980 --> 0:15:55.910 at least two months out from when your fixed rate 0:15:55.910 --> 0:15:59.150 is ending, you want to know from your lender what 0:15:59.150 --> 0:16:00.470 right are you going to put me on? Or at 0:16:00.470 --> 0:16:02.480 least what is it now? And you know, if rates 0:16:02.480 --> 0:16:05.180 go up, what will be added to that? So you 0:16:05.180 --> 0:16:07.609 can start to shop around and look at all those 0:16:07.610 --> 0:16:11.230 usual sites that can sort of compare the market, find 0:16:11.240 --> 0:16:13.790 a right city and get an idea of what those 0:16:13.790 --> 0:16:16.360 competitive deals are. Because you're right, Tom, You know, we 0:16:16.370 --> 0:16:18.229 still have this vision of the banks of, you know, 0:16:18.230 --> 0:16:22.490 they're there, they're not doing deals. They're charging around high rates. 0:16:22.490 --> 0:16:25.900 But for new customers, there really are some competitive write 0:16:26.540 --> 0:16:28.160 out there. And you want to make sure that you 0:16:28.160 --> 0:16:28.960 get one of them. Yeah. 0:16:28.970 --> 0:16:32.420 And like basically just never take anything at face value. Right? Never, 0:16:32.780 --> 0:16:35.480 never take the first number you're given, you know, when 0:16:35.570 --> 0:16:37.730 when these sort of things come along because there's almost 0:16:37.730 --> 0:16:40.460 always going to be either from that lender or a different. 0:16:40.460 --> 0:16:41.420 Linda a better offer. 0:16:41.490 --> 0:16:43.880 Yep. And even if you don't switch, call your current 0:16:43.880 --> 0:16:45.739 lender and say, Hey, you've just put me on this 0:16:46.700 --> 0:16:49.850 vastly inflated rate. Can you can you do better place? 0:16:49.850 --> 0:16:52.790 Otherwise I will walk away, you know, to treat a 0:16:52.790 --> 0:16:53.960 mean ticket That's. 0:16:54.020 --> 0:16:58.760 It's like in love like in finance. So sort of 0:16:58.760 --> 0:17:01.640 looking at Clare's budget in terms of things that she 0:17:01.640 --> 0:17:05.570 spends money on. Jess, you've actually identified some areas in 0:17:05.570 --> 0:17:08.240 in Claire's budget where, you know, you think she might 0:17:08.240 --> 0:17:10.190 be able to trim some costs to be able to 0:17:10.400 --> 0:17:12.680 close that gap for when she hits this mortgage cliff. 0:17:13.070 --> 0:17:16.220 Yeah. So I think once you factor in the higher 0:17:16.220 --> 0:17:19.790 mortgage repayments and the childcare costs, we could be a 0:17:19.790 --> 0:17:23.210 little bit close and there's going to be a need 0:17:23.210 --> 0:17:27.920 to look at the more variable or discretionary purchases as 0:17:27.920 --> 0:17:31.400 we all are. And some of those things can include 0:17:31.400 --> 0:17:33.619 things like eating out. So there's a couple of hundred 0:17:33.619 --> 0:17:36.980 bucks some months for eating out in the budget or 0:17:36.980 --> 0:17:40.460 in what we're observing in the spending. For Claire, sometimes 0:17:40.460 --> 0:17:46.070 there's Ubers, you know, going to to wherever we're going. And, 0:17:46.100 --> 0:17:48.470 you know, she's got the same problem that I've got, 0:17:48.470 --> 0:17:51.200 which is home decor, which I suspect means she's going 0:17:51.200 --> 0:17:53.340 to Kmart too much, which I used to do is 0:17:53.390 --> 0:17:54.920 you just go on a little trip and you just 0:17:54.920 --> 0:17:57.770 want some more pillows or candles or whatever it is. 0:17:58.430 --> 0:18:00.830 So maybe there's there's a 100 or something bucks a 0:18:00.830 --> 0:18:04.490 month going on that, you know, there's there's also like 0:18:04.609 --> 0:18:07.220 a bit of skincare spending, you know, And I'm like 0:18:07.220 --> 0:18:11.389 not about about like don't spend any money on yourself, but. 0:18:11.480 --> 0:18:14.840 This is the time where we're sort of investigating the 0:18:14.840 --> 0:18:18.480 cheaper options. We're not walking into Mecca, we're walking into 0:18:18.740 --> 0:18:22.130 Chemist warehouse somewhere, not doing the top brands. We're sort 0:18:22.130 --> 0:18:23.689 of understanding a tub. 0:18:23.690 --> 0:18:29.400 Of a tub of Vaseline. That's good for your skin, right? Yeah. 0:18:29.430 --> 0:18:33.680 Moisture. A set of film face cleanser. I'm like, but like, 0:18:33.920 --> 0:18:37.520 we're trying. The store bought shampoos where, you know, we're 0:18:37.520 --> 0:18:39.590 not turning our nose up at some of the home 0:18:39.590 --> 0:18:42.650 brands in the cheaper options. So that's where we can 0:18:42.650 --> 0:18:45.750 just do a little bit more of the finessing, you know, 0:18:45.770 --> 0:18:49.250 around going out. And I think to be honest with you, 0:18:49.250 --> 0:18:51.800 you know, if you've got the big mortgage, it's probably 0:18:51.800 --> 0:18:54.439 going to mean I hope you had your post-COVID holiday 0:18:54.440 --> 0:18:56.720 already because we might not be having one of those 0:18:57.109 --> 0:19:00.020 in the next year or two. And, you know, that 0:19:00.020 --> 0:19:03.439 sounds sad, but if you're looking for ways that you 0:19:03.440 --> 0:19:06.200 can cut your discretionary spending, I think that some of 0:19:06.200 --> 0:19:08.840 the big ticket items people might be just staycation ing. 0:19:09.170 --> 0:19:11.090 If you're meeting up with friends, we're going for a 0:19:11.090 --> 0:19:13.490 walk in the park. We're not going out for dinner. 0:19:13.640 --> 0:19:16.159 So some of those little changes like that just to 0:19:16.160 --> 0:19:18.859 flag that, they are things that you can tinker with 0:19:18.859 --> 0:19:21.500 and you know, in ordinary times, I'd love to see 0:19:21.500 --> 0:19:24.590 those in everybody's budgets. But when we're battening down the 0:19:24.590 --> 0:19:28.970 hatches and preparing for this massive mortgage cliff, the big 0:19:28.970 --> 0:19:31.130 pain that is coming, there are some of the little 0:19:31.130 --> 0:19:33.560 tweaks that we can make that really do add up. 0:19:34.420 --> 0:19:37.090 Yeah, absolutely. And that's the name of the podcast. It 0:19:37.090 --> 0:19:37.540 all adds up. 0:19:37.570 --> 0:19:40.630 I just realized it all adds up. Mike dropped that and. 0:19:42.340 --> 0:19:45.669 But yes, look, I think in conclusion, Clare has a 0:19:45.670 --> 0:19:48.639 very solid looking budget and she's doing a great job 0:19:48.640 --> 0:19:51.460 squirreling extra bits of cash away. But you know, these 0:19:51.460 --> 0:19:55.870 childcare costs that will be coming through the mortgage, significant 0:19:55.869 --> 0:19:58.090 increase in the mortgage repayments will be coming through will 0:19:58.090 --> 0:20:00.550 mean that she'll have to start trimming some costs here 0:20:00.550 --> 0:20:00.880 and there. 0:20:01.090 --> 0:20:03.129 Yeah. And I would say get on that money Smart 0:20:03.130 --> 0:20:07.900 mortgage calculator today everyone, and start playing with your numbers 0:20:07.900 --> 0:20:10.960 and getting some idea of what that hit is going 0:20:10.960 --> 0:20:12.609 to be. We don't know exactly what's going to happen 0:20:12.609 --> 0:20:16.720 to interest rates, but running some scenarios and figuring out 0:20:16.720 --> 0:20:20.500 what is in my budget that can go overboard when 0:20:20.500 --> 0:20:24.010 that comes. So the key takeaways, I think for Claire, 0:20:24.369 --> 0:20:27.640 you've got those childcare costs coming at you and that 0:20:27.640 --> 0:20:30.040 is going to eat up a big chunk of your 0:20:30.040 --> 0:20:34.420 what was formerly your savings. So just be braced for that. 0:20:34.420 --> 0:20:38.140 It won't be forever. Eventually kids go to to school 0:20:38.140 --> 0:20:40.450 and if you go to a public school, you will 0:20:40.720 --> 0:20:44.409 feel that relief of thousands of dollars a year streaming 0:20:44.410 --> 0:20:47.170 back into your budget. And again, with the mortgage cliff, 0:20:47.170 --> 0:20:49.900 you know, we've got rates going up. They won't keep 0:20:49.900 --> 0:20:52.600 going up forever. And hopefully we will get to a 0:20:52.600 --> 0:20:55.540 point where we've got on top of inflation and interest 0:20:55.540 --> 0:20:58.960 rates can start to come back down again. And that 0:20:58.960 --> 0:21:02.260 will relieve the pressure on people. But there's definitely this 0:21:02.260 --> 0:21:05.109 pinch point coming for at least the next sort of 0:21:05.680 --> 0:21:08.320 6 to 12 months where we will have to batten 0:21:08.320 --> 0:21:11.650 down the hatches and look at some of the discretionary spending. 0:21:11.650 --> 0:21:13.750 And I think that if Claire continues to keep a 0:21:13.750 --> 0:21:17.140 really close eye on her expenses, that that she'll be 0:21:17.140 --> 0:21:18.760 well equipped to do that. 0:21:20.310 --> 0:21:23.760 Thanks, Clare, for calling in with your budgets and some questions. 0:21:23.760 --> 0:21:26.190 We loved hearing it and thanks everyone else who's been 0:21:26.190 --> 0:21:29.160 sending in their their budgets and questions. It's been great 0:21:29.160 --> 0:21:31.740 to read. We're working through it slowly. And you know, 0:21:31.740 --> 0:21:34.290 you'll be hearing someone new next week with with some 0:21:34.290 --> 0:21:36.870 more questions about a whole bunch of different stuff. So 0:21:37.140 --> 0:21:39.510 thanks so much for listening, as always. And we will 0:21:39.510 --> 0:21:40.139 see you next week. 0:21:40.320 --> 0:21:42.179 Thanks for listening. See you next week. 0:21:49.640 --> 0:21:51.650 This episode of It All Adds Up is produced by 0:21:51.650 --> 0:21:55.040 Chee Wong. The information discussed is general in nature and 0:21:55.040 --> 0:21:58.160 does not take into account your personal financial situation, goals 0:21:58.160 --> 0:22:01.010 or objectives. You should always do your own research or 0:22:01.010 --> 0:22:05.030 get professional advice before making any major financial decisions. If 0:22:05.030 --> 0:22:07.400 you'd like today's episode, hit follow a new podcast app. 0:22:07.490 --> 0:22:09.680 Leave a review and recommend it to all your friends. 0:22:09.950 --> 0:22:12.350 You can also submit your list of questions in text 0:22:12.350 --> 0:22:15.830 or audio form at. It all adds up at 9:00 0:22:15.830 --> 0:22:17.870 PM today. Thanks for listening.