Refinancing tips to save you thousands! 2023 Housing Market Predictions

Hello and welcome to the Property and Lending Show hosted by Kyrillos Mansour (KM), Fadi Youssef and Mark Kilada

This podcast episode is brought to you by First Brick Property Buyers Agency and Powerloans 

This week we discussed how you can save thousands via refinancing as well as 2023 market predictions 

If you would like to get in contact with KM, Mark or Fadi, you can find them here:
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Mark@powerloans.com.au

Fadi@powerloans.com.au

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Transcript

[00:21] Kyrillos Mansour (KM): Hello and welcome back to the Property and Lending podcast, season 2023. As always. Joined with Betty and Mark from power loans. How are you, gentlemen? How was your new year?

[00:34] Fadi Youssef: I was in bed by 1015, so it was pretty good for me.

[00:43] Mark Kilada: I was a fire off every time.

[00:45] Fadi Youssef: Yeah. How about you, where were you?

[00:49] Kyrillos Mansour (KM): I was at a friend's house and we were just enjoying each other's company to 01:00 A.m., watching the soccer and we're going to at home. I went to sleep.

[01:05] Fadi Youssef: Pretty boring. Every year that goes born.

[01:10] Kyrillos Mansour (KM): We'Re back and I guess we're going to be even more consistent this year than last year. And we had a lot of listeners and good episodes last year and good guests this year. We've got some interesting topics and stuff to come through and some good guests coming through as well. Before we kick off today's episode, before we'd ask Mark, what are your general feelings on 2022? How did you find the year from a personal perspective as well as a property and lending perspective?

[01:42] Mark Kilada: Let's think of property and lending across the city market. We saw a downturn, which was interesting because it doesn't happen too often to the degree that it did. I think it was like 10% or something. Correct me if I'm wrong. Obviously markets within markets, like we say, not every single suburb went down. But generally speaking, interesting time for property. Very interesting time for lending as well. With rates moving so quickly and pre approvals despite being pre approved, no longer servicing within the pre approved period. As the rates were moving so quickly, we also found a few banks coming out and saying, hey, send us your clients to do pre approvals with us because we'll be locking in those assessment rates. So if you're pre approved for X $1,000, then when you come to purchase, you will be able to get X $1,000, assuming obviously income doesn't change. So a lot of sort of interesting changes, a lot of good cash back offers coming out for refinances at the end of last year when the activity in the refinancing market was at record levels as well. So, very interesting time for 2022 and 2023 won't disappoint.

[02:55] Fadi Youssef: And how does that make you feel? Personally.

[03:03] Mark Kilada: I think everyone saw the pinch with all the rates going up. So I don't think anyone enjoyed anyone that was on variable at least would have enjoyed. I'm sure everyone that was fixed was very happy to see what they were paying and what they would be paying if they didn't fix. So who knows where everyone that fixed and for anyone that's variable, get us up and let's get you a better deal.

[03:25] Kyrillos Mansour (KM): Well, speaking of a better deal, by the way, that was a beautiful summation of 2022. I can't wait for next week's. Mark's, interesting tip of the week, very excited. But yeah, speaking of refinancing and what people are going to do, obviously interest rates have been increasing pretty much all of last year. Looks like they're going to continue to increase. Inflation rates have again increased in the last couple of months to 7.3%. So whilst inflation increases, the RBA tells us that interest rates are also going to continue to increase to try and curb the inflation rate. So based on the fact that we're thinking that interest rates are going to continue to rise and something that you touched on in your feelings on 22 and something that people are coming to you guys for refinancing before, we would have a chat about refinancing. And obviously, because as interest rates go up, people pay more for their mortgages and having lower borrowing powers than they would have had before. So I guess is that the best way to combat the rise in interest rates? Is it just to refinance and just keep speaking to your banks and speaking to your brokers on what the best rates are and just continually doing a you guys call it a health check on your, on your loans.

[04:49] Fadi Youssef: I think this year, especially in the last couple of years during Curve and everyone fixed on their 1.98, some people fixed at 1.75 and most of our you know, you see a lot of customers that come through or fixing between two to three years. We had like a few customers that went and fixed for the whole five years at 1.98 or 2.8, which was a pretty good move on their behalf of time now as well. I think the conversations that we're having now with customers a little bit more intense, a little bit more upsetting, you'll find the customers coming off that beautiful honeymoon rate that we've been discussing for the last couple of years and depending on how big the loan is, it's a large increase to their monthly repayment. So it's definitely something you'd be speaking to your broker about, calling them up in regards to finding the best interest rate. As Mark mentioned previously, we've got quite a number of lenders at the moment offering cash back offers, which does help. It covers the transfer fees in regards to government transfer fees for the loan discharge cost and also leaves you a little bit less, you know, to enjoy yourself with depending on which lender. So Mark, from memory, I think we had lenders offering $6,000 cash back, $5,000 cash back, $4,000 cashbacks, all the way down to $2,000 cashbacks. Obviously, most of our customers try to take advantage of the 6004 and $5,000. I think we both saw a lot of customers come free just before Christmas time, and if they had a few properties, some customers were getting between 8000 $14,000 in cash back and at the same time getting a much better rate on the home loan. And we're seeing a lot of more proactive customers asking a lot more questions around offset accounts. I've saved a bit of money now that the rate is going a little bit more high. I can actually offset my home loan to try and save on the interest. So definitely there's a lot of options out there. And let's not forget, does anyone remember what the interest rates were before COVID hit? What the average interest rate was?

[06:47] Kyrillos Mansour (KM): Yeah, 78%. And if you go far back enough, they were in the teens.

[06:55] Fadi Youssef: So one month, right, to cover it. Before the first cover went down, I was fixing customers on a 3.75% three year fixed and that was an unbelievable deal. Everyone was gone for that sort of rate. The variable rate at the time was around the 4.2% average. So these were the rates that we were okay with paying at the time. What happened through Permit, I think we've discussed this quite a bit. 2022, where Buffer rate went down, interest rates went down, borrow capacity went through the roof and we found a lot more people coming through and able to borrow a lot more than they were able to six months or two months or three months prior to Covert. And I think a number of us got trapped in the RBS are not going to increase the interest rates to at least 2024. Nothing to worry about. You can stay on these rates for that time being. And that's the kind of challenges that we're facing now as brokers or all brokers or lenders are facing where customers are coming through and quite surprised in regards to what the repairments are now going to be increased to. And I guess our job is to try and make that experience and that rate as low as possible to make the monthly repayments a little bit more suitable for their needs.

[08:09] Kyrillos Mansour (KM): Yeah, interesting. You talk about cash back because I just refinanced and my cash back went missing. Apparently Power Loans just bought a new car or something. Anyway, moving on, I might ask you for people that don't know simply what is a refinance? What does that actually mean?

[08:30] Mark Kilada: So a refinance is when your current mortgage is discharged from your current lender and is kind of like bought out, if you want to think about it that way with a new lender. So essentially what happens is when you bought the property initially, your bank that was providing the funds, plus your deposit was uploaded probably on this platform called Texas Lists, now used and everything sort of done digitally now. And then the seller sort of met up on the same platform and the funds were exchanged and now your name went on the title and your bank's name went on the title. When a refinance happens, same thing. Your current bank, your current bank will go to PEXA to give away your loan to the new bank that will also be on PEXA. They're kind of like buying out your loan. There are costs involved in the process and it does differ between states. So roughly New South Wales. Again, very rough figures. They do change every but they change over the financial year. So roughly maybe $300 for New South Wales. That's just the title fees that's regarding to change the title on the property. Your name still stays on the property if you're refinancing, but your bank's name, current bank will be moved and the new bank goes on. So that's the fee there in Queensland, it's a few thousand dollars. It's actually quite a bit more expensive and so every state kind of differs and that's kind of the ideal behind cashback offers to entice customers to come to us. The fees and the cashback are going to cancel out or you will be left with a bit of a surplus. So there's no reason not to refinance. That's kind of the rationale behind it in terms of the process. It's pretty much exactly the same as when you came to buy the property initially in terms of different documentation, you don't need to evidence your savings because you're not purchasing a property. So that's one difference. The second one is typically we have to hold six months of statements with your current loan. That's just to show the conduct on the loan so that we can make sure that there's no misrepayments or anything because that could impact the result of the refinance. So that's really the only two changes besides that same sort of stuff pay slips or if you're self employed, tax returns with IDs and that sort of thing.

[10:44] Kyrillos Mansour (KM): Yeah, go ahead.

[10:48] Fadi Youssef: I think it's important to highlight as well when we're looking to refinance, where a customer is coming to us look to refinance or trying to get a better rate, we're always going to try and negotiate with their current lender because it's a lot more less expensive for them. They're not going to have to do pay the transfer cost, the discharge costs, etc.

[11:06] Kyrillos Mansour (KM): Here.

[11:06] Fadi Youssef: So we always try to with our existing customers or new customers come through, they're looking to refinance just to make it more of a smoother kind of process because at the moment it's a little bit more harder for our customers. Living expenses are going up, like you said. Inflation is going up, grocery is going up, petro is going up, everything is going up. So we're always going to do the right thing by our customers in regards to trying to negotiate with their current lender. And for example, let's say customers are coming through now, they're looking to refinance, they've come off their two year fixed rate. We all know that it's a 30 year loan term for each home loan. So we're at 28 years. If they own occupied property and they're looking to pay it down, it's in their best interest to stick to the 28 years to continually pay that home loan down so they're not constantly renewing it. But in a lot of scenarios, or some scenarios, it's more sometimes beneficial for the customer. We lower that loan repayment, obviously extending it back to 30 years lowers that loan repayment for them. But it's important to highlight that we try to negotiate with the current lender to just try and save our customers a little bit more stress, a little bit more time because it's still like marks in a process. In regards to purchasing a home, you still have to supply documents, you also have to supply accounts, rates, statements. But that's the most important thing is actually looking after the customer, making sure we negotiate with the current lender. If the current lender are not willing to come to the table in regards to what rates other lenders are actually out there handing out or at least giving the customer cash back, that's when we move on.

[12:38] Kyrillos Mansour (KM): Yeah, in some circumstances that the loan will reset again to 30 years. So it's going to obviously add a longer period but might reduce their repayment. So obviously the conversation of the broker and when we talk about millions or close to million dollars plus in loans, those 1% or so, we're talking thousands of dollars over the years. So definitely worth a conversation with the broker. Are there rules to refinancing? Like how soon you can refinance or if you're on a fixed loan, can you refinance or are there rules to refinancing or can you just do it at any time?

[13:17] Fadi Youssef: Honestly, it depends on what product you're on as well. So you mentioned fixed interest rate. For example, if you Google, obviously no one on a 1.75 or 1.98% is not going to come to us to refinance. If you're on a variable, there really isn't no rule in regards to when you can refinance. It just comes down to it's going to be beneficial for the customer. So if you're going to let's say you refinance to one lender and after six months you want to change again, is there going to be a financial benefit to that customer? Is the other lender's interest rate a whole lot more lower than their current lenders interest rate? And that's where we once again will try and negotiate with the current lender. Customers are still new customers to Ex Bank. We're trying to hold on to them, but they are getting other deals outside. Are you able to match it? If not, then if it's going to be financially beneficial for the customer, we'll definitely move on. I don't think we ran into the problem in regards to breakreach costs during COVID because no one wants to break their interest rates of that low. And I think we're going to see now, mark, have you seen too many customers fix their interest rates in this market?

[14:23] Mark Kilada: The most recent one was probably four months ago. Five months ago? Like 4.4 or four point something.

[14:29] Fadi Youssef: That was one of the promotions I was going up. One of the lenders that were using for a two year fix like it was just unheard of at the time as well.

[14:37] Mark Kilada: Yeah, no. Besides that everyone's variable and like you said, like I've got a customer whose fix ends on Friday, the bank is sort of ready to do the refinance and everyone's agreed to the term. But we obviously set the settlement date for the following business day. Which brings me to my next point. When you come to think about all of these things and your fixed rate is about to end, we always tell people, give us a call three months prior because we want to leave enough time for you to send. US all the documents for us to go through all the documents and submit the application, get the approval, get the loan documents signed, get both parties on the PEXA workspace to settle, and then we can pick the settlement day. And that's the beauty of it. I would rather be ready one month prior than one day too late. So definitely contact us three months before your fixed rate ends. You should be able to find it through the account details on your app the of the loan so that we can book in the settlement date exactly like when you come to purchase the property and settlement is booked in. We do the same thing. We book in settlement for whenever you want it to be, which financially makes sense to do the day after the fixed rate because you don't want to rush you off your current very low fixed rate to go to a higher fixed rate. It makes no sense.

[15:47] Kyrillos Mansour (KM): But just to clarify, if someone was on a fixed interest rate and they wanted to refinance, they would have to wait until that fixed period ended otherwise there would be fees associated.

[15:58] Fadi Youssef: They wouldn't have to necessarily wait, depend on what their next move is like. If they want to break the home loans, move on to another lender to have them cash out and purchase another property because they're able to service better on another lender, then that's beneficial for the customers because they're going to take on another property on. So there really isn't any rules. It's always going to come down to as brokers we're told is there a financial benefit to the customer for us to move them onto another lender? It's always going to come down to what's better for the customer. I think the simple answer is basically there really isn't any rules but obviously we're not going to be refinancing just for the sake of refinancing. We're going to be refinancing if there's going to be a financial benefit to the customer.

[16:36] Mark Kilada: For sure you refinance. There's obviously a credit inquiry that goes on your credit report as well. So it's not something you want to do every few months. That's the other thing as well. I was also going to say that a big missing conception with refinance. A lot of people that call me in and say how I want to refinance my property. My first question is and then a lot of them that I think, say I want to pull out Equity. I'm like, okay, we don't actually need to refinance. You're going to end up getting a break fee. You're going to end up taking your 1.98 to a five point whatever, four point whatever just to cash out. Or we can just cash out or equity release, whatever you want to call it with your current lender. We're not breaking the contract. Your loan is staying exactly the same. If we're cashing out or releasing, let's say, 50 grand or 100 grand, equity is just going to come up as a new loan in your app. We're not breaking your contract, we're not touching a loan. So even if you wanted to sort of set yourself up for the next purchase or cash out to do renovations or to trade in the stock market or whatever it is, we definitely don't need to move lenders. It has to make sense. So we obviously spend time with our customers understanding exactly where they're at at the moment, where they want to be and we find a way to get them there, minimizing all costs along the way. So if we don't need to refinance, we definitely do.

[17:52] Kyrillos Mansour (KM): Since you mentioned the credit inquiry and whatnot if someone just wants to find out if it's worth it, they can obviously just give you a call and you guys can run a scenario and have a look if it is worth it for them to refinance prior to them submitting documents, et cetera. Is that correct?

[18:09] Fadi Youssef: Absolutely. So we've got an aggregator or system that allows us to do it in a couple of minutes so we can be on the phone with the customer. It's a three minute phone call. Obviously we want to be thinking to the customer a lot more, see how they are going, knowing where they've been over the holiday period, but only take us about two to three minutes to calculate. There's going to be a financial benefits when we start from a couple of questions over the phone and ask them for their current repayments. And as Mark said, it only benefits the broker to refinance across. If you would refinance it for the sake of it, it's might not be beneficial for the customer, but it's always going to be beneficial for the broker because we're always going to be getting paid from that new lender as well. But it's always going to have to come down to that customer. And I think where part of compliance and regulation is that we can't move the customers across unless there's a financial benefit to them. That's just the rule.

[19:02] Kyrillos Mansour (KM): Yeah. So I mean, definitely with interest rates rising, I mean our advice to everyone would be pick up the phone, give you a broker a call, call fairly, call Mark and just find out, is there a better option for me? Because you could be saving thousands of dollars across the year easily.

[19:18] Fadi Youssef: You could be saving with your current lender as well because unfortunately, I think lenders have a ten to give the customers a call in regards to are you on a better rate or is there anything that we can do for you? And Mark mentioned before, if you are on a fixed rate, getting in contact with your broker? Three months. The magic that we have here is that our customers actually get an alert and we actually get an alert as well. Three months prior to our customers fixed interest rates going breaking. So we're getting our customer and our customer is notified three months prior to that fixed rate coming off.

[19:52] Kyrillos Mansour (KM): Coming off the period, yeah, for sure. I think that's pretty self explanatory. The bank is obviously not going to call you either to say, hey, we can give you a better rate because they're not going to be making, it's not in their interest. They want to make as much money off you. So call your brokers because the broker will have access to all the banks and all the lenders and all the options for you and they'll be able to find out if you can save money. Very simply, just call your brokers.

[20:21] Mark Kilada: I was just going to say also I had a scenario just exactly about this. I had a customer called me yesterday, not one of my clients. Someone knew I didn't sort of write their loans initially. I'm currently with a big lender and her fixed rate ends in about two or three weeks or something. And the first thing I told her was, here's the number for the team that has the most power in the bank to reduce your rate. What I want you to do is give them a call directly, have a chat with them, see what your rate is going to be after your fixed rate. So a lot of people don't know, but when your fixed rate ends, it doesn't automatically go to a competitive rate. Definitely not. It goes to what we call a revert rate. And her revert rate, this is for an owner occupied property, the comparison rate.

[20:59] Fadi Youssef: Yeah.

[21:00] Mark Kilada: And her rate was over 7%. For the home that she is about 7.6% over seven and a half. And so if she did absolutely nothing, if she didn't call me, she didn't call this thing. She did absolutely nothing. It was seven and a half percent. After contacting their number, they reduced it to 5%. That's two and a half percent off with a simple phone call. She was on the phone maybe ten minutes. So it's literally just a phone call away. And your average rate starts the day after your fixed rate. So definitely don't wait till you're one week before, two weeks before and be stressed. I need to do all this in two weeks. Contact three months before that are sorted out for you and you'll be here, you'll be ready a month early, two months early. Have your approval on your loan documents signed. And we just told the bank, hey, do it on this day because they finished their fixed rate the day before.

[21:44] Fadi Youssef: In KMU. You were discussing this week in regards to making the podcast a bit of more of a show, true Colors. This is one of the things that really frustrates me about our industry is that why are they being put on the highest interest rate possible after they come up a fixed rate? Or even in some scenarios, variable rates. If the variable rates, after a couple of years, if you haven't done a health check internally or with your broker, it gets reverted to a comparison rate. And what that comparison rate is, is basically all fees involved over the 30 year loan term or 25 year loan term of the actual mortgage. Why is that being charged to the customer? Why does it need the customer to give them a call and say, hey, I am up for the better interest rate. Can I please have that? Why is it just not given to our customers? And this is what.

[22:34] Kyrillos Mansour (KM): You know the answer. You know the answer to the question. The bank is not there to hold you. The bank's not your friend. The bank is there to make money. So if you don't ask, they're going to take your money. They don't care.

[22:51] Mark Kilada: They're not there to hold your wallet.

[22:57] Fadi Youssef: We're always told, and we do this just naturally to look after our customer where it's part of compliance, making sure that they're on the better interest rate to follow up with their customers. But I don't know because we have had a few customers that call us for exactly the same scenario that Mark just gave us and it's just quite frustrating in every industry. Everyone's frustrated. But this is not to be reverted to a 7% on a property that you live in, which is a property lock. And I guess in most strategies you want to try and pay down as soon as possible. Why are they passing on that 7%? Why do they believe that customers are okay with that 7% or they'll be fine? No, I think that's something that definitely needs to be looked at or changed in the future because unfortunately there is customers out there that don't have the capacity sometimes to be on top of everything. Everyone's life is busy, everyone has stuff to do. Some people might have five or six kids, they don't have time to look at home and they're just making sure the homeowner payments are there. So that's something I've always discussed with BDMs with different sort of lenders or on CPD days that we go to why isn't this looked at? Why are we just passing? Or why the lenders just passing this sort of rates on customers? And sometimes they're not aware of it, but the letters being sent out, an email has been sent out, junk mail, whatever it may be, they just don't know.

[24:18] Mark Kilada: And just to give you I just sort of ran just very quick figures, just to give you an idea of how big of a difference that was for the customer. So the customer I'm just pulling dummy figures in. Let's say the customer owed 600 grand on that loan and let's say you went to 7.6%. That was the revert rate. That's what they told her and they brought it down to 5%. Assuming she had 28 years left on her loan as well, she would say just by that ten minute phone call, $997 per month. $1,000 per month from a ten minute phone call.

[24:48] Fadi Youssef: And that's a $600,000 line. Mark, what if it's a one military up to one mil?

[24:55] Mark Kilada: So if we go 7.6% compared to 5%, $1,660 monthly extra.

[25:06] Fadi Youssef: And then the Royal Commission came out asking for brokers to no longer be around, because when they're looking after the best interests of our customers, I can get into the Royal Commission. But leave that ran there. That can be for another thing.

[25:22] Kyrillos Mansour (KM): That's why we do what we do, right? So we can educate and empower the listeners. And if anyone is listening and has a friend that's not listening, subscribe and put the power in your hands. Because as Mark said, there, that's an example. You're talking big money there over the course of a big, big money. That's a couple of holidays and a gift to first brick and power loans for being nice people. It's a lot of money there. I don't have anything else to ask on refinancing, if anything, if you guys have any questions, otherwise we can wrap it up.

[26:00] Fadi Youssef: I was actually going to ask you. We've been talking about refinances in the market dropping in Sydney. How's it looking for 2023 in general across all of Australia, interstate and in Sydney in regards to property purchases, what changes are you seeing? Are you seeing changing customers where they're freaked out in regards to inflation? They don't know if they should be spending money now or holding on to their money. What are we seeing out there? Because at the moment, Mark and I see a lot we're still seeing a lot of refinancing purchases coming through, but we're seeing a lot more refinances coming through. How does it look?

[26:33] Kyrillos Mansour (KM): I think definitely the priority for a lot of people is refinancing for sure, as a step one, to get the best rate. However, in saying that as a business ourselves, this is the busiest we've ever been in the history of our business. Which doesn't make sense in some people's eyes, but we see it as a lot of these. A lot. Of our clients are people who follow and listen to our podcasts and follow our pages and whatnot, but and they're quite educated, and they understand that, you know, there's always opportunity. And these are actually the best times to purchase what we're seeing and what I think we're. Going to see across the year is you know, as long as interest rates continue to rise, obviously borrowing powers decrease. Now when interest rates rise, as Mark was saying in his example a million dollars the difference is huge on that two and a half percent saving. So the higher the loan amount obviously the more expensive that loan becomes and considerably more expensive. So the very, very expensive areas we'll just talk Sydney for a second. Your elite areas your point pipe vault lose these kind of areas they get hit the hardest because the demand pool for those areas is already very small. You only have a handful of people buying a five to $10 million property plus and then you go into the level below, which is your two and a half to $5 million properties, which again, you might have two handfuls of people that can kind of purchase these properties so they get hit the hardest because the demand pool is quite small. You then go into these areas anything kind of in that 800. So people who are borrowing 1.2 to 1.5 their borrowing powers are probably dropped right and it might drop them into that 1,000,001.1 just under 1 million range. So you find that the areas that are sub a million or sub 1.1 becomes extremely competitive for anyone that wants to buy steel and you find that these areas tend to not fluctuate hugely. You might not get growth, but you might not get massive losses as well. You might have a net -0.1% -0.2% over the course of the year. But when CoreLogic or the news or whoever reports this data at the end of the year, for example, at the end of 22, like Mark said, minus 1011 percent for Sydney that's Sydney as a whole. But that Sydney as a whole obviously includes point Piper Volclus bondi, and it also includes Campbell town ruse. Rabie. So these are very very different markets within Sydney. So when you look at it as a whole, you might have Campbelltown up 0.5% or -0.1% for example and then zero pipe or -4% and then so the average becomes extreme because it doesn't really make sense to look at Sydney as a whole like that, because the areas are so different. So I think what we'll find is the areas that are competitive are the areas where they're more affordable areas. So the more affordable areas you're going to find a lot of buyers. So we're still buying in Adelaide and we're still getting knocked out of the market and there was an open home last week in Adelaide that we looked at and there was over 100 people at the open home, which is unbelievable but the purchase price for this property was $450,000. So people who are already at that price point and then people had 6700 and their budgets have dropped have now come into that price point as well. So you have so many more people in a smaller segment, of a smaller price segment. So your demand pool is heavily increased in an area where there's very limited supply. So I think what we're going to see is certain areas are going to drop and then certain areas are going to do quite well, if at the very least, not drop. And we all know what happens as soon as interest rates drop. We all get an influx of phone calls, I want to buy, I want to buy, I want to buy. And then obviously now you have an extreme amount of buyers happening coming in. At one point they want to invest or they want to buy their own home and then again the supply is limited. So that's where we see these really crazy runs and history repeats itself. I mean, it's happened four or five times over the last 30 years. Every time there's some sort of economic issue, whether it was a GFC, COVID, whatever it is. So I expect that to happen again because this is not new, it happens over and over again and we just got to watch trends. So as a buyer or in our business, what we say and nothing changes, you guys will know what I'm going to say here. If you've got the capacity to purchase an investment property, now is the time to do so. If you don't have the capacity and you're not financially in a position to do so, then this is the time where you're saving money so you can get ready to purchase. But whoever is buying now, once those interest rates drop slightly and inflation drops slightly and there's better sentiment in the market, these people are going to make the biggest gains because they've already got that supply. They control that lack of supply that already exists. So what we do in our business, obviously we do a nationwide data analysis for every client, personalized to their strategy and their situation and their finances and their budget. And we're trying to locate the exact Pinpoint top five or ten suburbs in all of Australia for that person. So we're not buying in Sydney, we're not buying in Adelaide, we're buying in a very specific suburb in Adelaide or a very specific suburb in Sydney for that person's criteria. So I think that's kind of my thoughts on what will happen this year. We'll see if it plays out that way, but based off history, that's exactly what's going to happen. If you've got the ability to buy, now is the time to buy. And in those very competitive markets, for example, that property in Adelaide that we were looking at, it's not only out of the owners and investors, it's people interstate, because their budgets have dropped. So they're looking, where can I spend my money? And if you had 700 grand in Sydney, which barely gets you a property and has dropped to 500, well, you're not buying in Sydney anymore. So they're looking at external markets, so there's a lot more demand into a very specific area with very limited supply.

[32:49] Fadi Youssef: One question I've got, we've been seeing a lot of customers that come through to you or through to us in the last couple of years. We saw a shift where a lot of customers always look, we want to invest in Sydney, there's more capital gain in Sydney. I think the rental is a little bit more better back then as well. Do you see customers coming back into the Sydney market in regards to investments or have we seen a change overall in regards to customers gone for the higher rental yield? Interstate, what you just mentioned there, purchasing for 490 grand or 480 grand Interstate. Are we going to see customers coming back into Sydney? Because I can't actually remember. Maybe we've had one or two customers in the last couple of months they invested in Sydney, but overall it's been a lot of Interstate.

[33:34] Kyrillos Mansour (KM): Yeah, it's a funny question. I was speaking to a client of mine a couple of weeks ago that we purchased for him, you know, 18 months ago in Sydney, and he's done well, he's done well. He's made, made some money. But when we had that conversation initially, you know, the data indicated it was better for him to purchase Interstate, but he was pretty adamant in Sydney, so we purchased in Sydney and he still made some good money. But that conversation two weeks ago was he just said to me out of the blue, I wish I just bought Interstate instead of Sydney. And I think that's really more of a cash flow response because obviously as interest rates go up, the rent and mind you, they're getting decent rent for what? For Sydney. But as interest rates go up, cash flow becomes a strain. This person is getting married, paying for the wedding, so their expenses, their life is changing, but that property, the yield has effectively decreased because of interest rates changing as well. I think the obsession with Sydney is only from people from Sydney, because when I speak to people from outside of Sydney, when we have our clients that come from Brisbane, Melbourne, Adelaide, not so much Melbourne, but Brisbane, Adelaide, Perth, wherever it is, aside from Sydney and Melbourne, sydney is not even a consideration. They just don't think about it. The question they ask me is where can I get the best returns? Whereas when I speak to people from Sydney and Melbourne, it's more so doesn't Sydney give me the best returns? Like there's a presumption and presumption or assumption, I don't know what the right word? There is an assumption that Sydney is the best. And that's usually because that's just where they've lived and that's what they know, or what they think they know. And when you average out the last 30 years, the growth rates from a percentage are almost identical across different states over the last twelve months, 18 months, adelaide has been the top performing state. Before that was Brisbane, before that it was Hobart. So it's been a long time since Sydney was the top performing state city. So, yes, I think people are still going to invest in Sydney, especially if they're from Sydney, but I think there is definitely more conversations occurring regarding cash flow as a consideration, especially if you want to build a portfolio or eventually buy your own home or whatever it is. And I think that's testament to you guys as brokers as well, having that conversation with them saying, I think this is the difference between a regular mortgage broker and the top brokers like yourselves, where a regular broker is just looking at this property, how can I get you whatever money you want for this property? Whereas you guys are looking at, okay, how can I help you get this one and then the next one and the one after, and the one after? And real estate is a game of finance. You have to be able to finance property to be able to buy more properties. So if you want to build a portfolio, we need to make sure that you can buy this one and then buy again. And it's not just an equity thing, it's an equity and it's a capital growth. It's a deposit. It's a deposit and serviceability. A lot of people forget about the serviceability part of it. They just think, I got a million bucks in equity, great. But your property is negative 12% a year. Like you can't afford to buy an Apple, let alone the property. Right? So I think credit to you guys as brokers and to the top brokers out there who are actually looking at it as a portfolio and not just one property purchase, because you guys help these people, educate them, and they in turn end up with an actual portfolio as opposed to just one property.

[37:20] Fadi Youssef: It's funny that you say, I've got equity in my property, why can't get a loan? That's one of the questions that we get regularly.

[37:29] Kyrillos Mansour (KM): Yeah. The other one is just because we're speaking out loud. The other one is, yeah, I run a business that makes 400 grand cashier on tax. I've lost 40 grand. How come I can't get a link? Well, doubled short anyway. Cut it off there before we get in trouble.

[37:51] Mark Kilada: Actually, just about that, I was just going to say as well, just about refinancing and also about valuations and the value of property has gone down and stuff. If your value of your property has gone down, where your loan compared to the current value of the property has exceeded 80%. Vast majority of all lenders will actually charge you LMI lenders Mortgage insurance to refinance. That would be another thing we'd look at before you refinance. Because, again, that wouldn't make financial sense. There are some lenders that go up to 85% if there's an LMI waiver. If you're an accountant, a lawyer and Medicare, we can go up to 90% with some lenders. So that's one thing. The other thing I was going to say as well. If you bought at your maximum borrowing capacity. Two years ago, when the rates were 1.98 fixed and the banks were only adding two and a half percent of that when they're assessing files as opposed to today, where the rates are, it falls to midfield and the banks are adding 3% on top, your income hasn't changed and you're, for example, interest only and the date is the same. Very likely. You probably won't be able to service the refinance. And that's where we come in. We obviously have 40 plus lenders that we can go on. We have their calculator, so we can chuck it on 40 plus lenders to check if it actually works. But just another two things to keep in mind.

[39:07] Fadi Youssef: And that's why it was so important during that time, having that conversation with the customers, with what's your strategy in your next one of the main questions? One of the main questions we need to be asking, I'm sure, Kim, this is definitely something that you'll be asking as well. What is your next five to ten years look like? Not now, not next year or the year after. What do you want to be looking to do in the next five to ten years? If it's a single apple coming through, are you looking to get married in the next couple of years? Are you looking to start a family in the next couple of years? Are you looking to move into state funding another job? These are the sort of questions that must be asked, because when we're in the moment, we're excited, we've all gone through that. We're in the moment, yeah, I want to get this, I want to get that, whatever it may be. But I think what we try to do is we want to know what the rest of your life is looking. We want to make sure we put you in a position where you can actually get to those goals, your goals. So I think that's one of the main questions. I'm guessing people that come to you, obviously, they were like, I want one property a year, I want two properties a year. Okay, how are we going to get there? Let's have a sit down and discussion on how we're going to get there. And if the customer is like, no, I want to buy properties in Sydney, but I want ten in the next ten years, is that possible? Or we're just going to be maximizing ourselves out on one property in Sydney?

[40:23] Kyrillos Mansour (KM): Yeah, for sure. That's the first thing we do with a client, is we ask them why we're buying property, because there's obviously a reason you're investing to build a passive income. Is it to help you buy your dream home? Whatever it is, we need to know what your goal is so we can work backwards, because if we don't have a goal, we don't know what we're working towards. What are we supposed to buy? How do we individualize the strategy to you? We can go buy you whatever, it might not be the right product for you. And just today we had a conversation with someone who was really keen to buy an investment property, was about to sign up with us, but then told me, you know what, we're actually thinking of buying a home next year. I said, well, put the brakes, if that's what you want to do. This purchase is going to actually inhibit you from doing that next year as opposed to benefit you. But if we're looking at buying that home in four years, five years, whatever, then, yeah, the investment property makes sense, but, yeah, we have to know because otherwise it can actually make it worse for you if you go down the wrong route. I think the takeaway is definitely have a conversation with your broker about refinancing because there is so much money to be saved, especially in the current climate with interest rates rising and whatnot. Speak to the brokers because these guys have that panel of, like Mark said, 40 lenders, and they'll find the best option for you and they will be honest with you and tell you if it makes sense to do so or not. And they're not just going to do it if it doesn't make sense. And the other thing is, yes, if you're in a position to invest, definitely this is a good time to invest, for sure. Nothing else to add. Cool. So we thought this was going to be a 20 minutes episode. The thing is going to be longer, but better for the listeners, I guess. Thank you as always, gentlemen, and we'll see you next week.