Create your own INTEREST RATE CUT! Ask Adam

Good morning everyone, and welcome back to Sugarmuma's File, a podcast that ignites your financial journey with inspiring stories and innovative strategies. I am your host, financial planner, Hannah Cannibell, and today we are in for another Ask Adam series where you get to be brought up to speed on your mortgage, what the going rate is, what's financially advantageous for you and your goals, and of course what you should know and understand and potentially be considering to help

The right? I'm not sure, but yes, you need to reach out to your bank, Gilly. You know, interest rate markets change all the time, and depending on how long you've had your loan for discounting changes. So we're always recommending at least once a year, contact your bank and try to review the interest rate. We do that every year for our clients.

You do that automatically. You don't even we do. Clients are even ask You just go and do it.

Yes, that's right, so why not? I mean banks take advantage otherwise, if you don't ask, you don't get and.

The squeakiest wheel always gets fixed first.

Absolutely, so it's always worth while doing either direct with your bank or through your mortgage broker. You know, it's not hard to look at what competitive what the competitive rates are out there, you jump online, it's pretty easy to get. All you need is a bit of information like that on a phone call. And they know that you're serious.

But also you know, if that figure is correct, zero point four six percent is the average saving that someone will get contacting their bank or going through a mortgage broker. That's a lot of money permit to be saving, and that's money that could be going towards the home loan and you know, helping pay off the mortgage a lot quicker, saving valuable time and money.

Yeah. Look, if you're looking at Sydney on the average of a million do or home loan five hundreds a month interest.

It's funny. You know, people will do all these extreme things to save money, which I respect and admire, but then quite often the simplest, most effective strategy is right under our nose. But we can't be bothered to because we, I guess have a bit of a block thinking there's going to be so much paperwork. It's going to be you know, it's going to force us to do our taxes or catch up on our personal accounting, and we.

Just well, yeah, some people just feel awkward about it or yeah, so like not wanting to bargain, you know, or haggle for you know, a discount if you're buying something in retail, it's the same thing. They're a bit nervous or awkward about making that phone call, but you shouldn't be.

Well, I guess that's where people like myself use you because you do it for me.

That's right.

I've never had to make that front call.

No, exactly, and you know we do it for you. And when when you're doing it ongoing. The longer, the longer that your rate is closer to the market leading rates, the less need you have to refinance. And that is a win because refinancing, you know, there are costs, always in costs involved with that, and if it's worth while refinancing, great, do it. Encourage it. But you can stay with your current bank and get a better rate. Why not?

Do you have a script for people who don't want to go and refinance, don't want to go through a mortgage broker, but need to call their bank and they're willing to have that awkward, uncomfortable conversation.

Wouldn't say a script, but you know, to your best bluff, I mean, yeah, just as I said, do your research, check what the best rates out there are. And then so on the phone you can you can talk to whoever you're speaking with. I want to ask for the retention team so they know you're serious about it, that you're looking elsewhere, and if you if they don't come to the party, you're at the door.

I feel like we need to do a role.

Let's try.

Okay, all right, So I want you to be a mortgage owner and I'm going to be the bank. So you're going to call me, Hi, Adam, How can I help you today?

Hi, nasty major bank. I've got a homeline account with you that i'd like to discuss my interest rate on.

All right, how can I help?

Do you need to identify me?

Most definitely?

Look, I've been my interest rate is now six point eight percent, and I've just been online and I've seen that there's rates of six point one percent out there. And my husband and I, well, I don't want to say my husband, my wife and I.

I'm sure your wife would be offended, but it would also be perfectly find if it was your husband my wife.

And I want to take advantage of that. So either we'll be looking to read finance unless you can sharpen our interest rate in order to keep us. Would you be willing to look at that for me?

And when you say sharpened. Do you expect the bank to match that rate or beat that rate.

Depending on the rate you're quoting. You know they would rarely beat it, but the idea, yeah, you want to ask them to match it, but either he always asks them to beat it. As I said, you know, at the end of the day, not so much that you're bluffing, but give them an opportunity to think that you're not serious about moving, and that you're just doing this out of process, and that you will accept a lesser discount than what you're aware is available out there. Then they'll

All right, everyone, you heard it from Adam. There is your script. We just did a little role play for you, so you can now confidently make that call to your bank and demand a better deal. All right. Another question I want to ask you is about changing jobs. If someone is about to buy home, or is about to apply for say a debt recycling strategy, or looking to refinance existing homeland, they are thinking of changing jobs, are about to change jobs, does this throw a spanner in the works.

Yeah, it ken. I mean, if you're you're changing to similar equivalent of what you're already doing and your income isn't reducing, then it shouldn't post so much of a problem unless you've got strong probation clauses within your contract, so that that would depend on your lenders appetite for that, if they've got any issues with probation. So ideally you'd prefer it. I'd prefer it clients weren't changing job because it is a risk, but most of the time it

Yeah wow.

So in that.

Scenario, having that, I guess, transparent upfront communication with the mortgage broker if there is a career change happening or going to happen, is important.

Yeah, and to get the timing because as I said, if it's and most of the time you'll assume someone's moving into the same role that they're doing and maybe getting a pay rise, which is all normal and great. It's more if it's one of those unique situations we're chaining into a different job together, or or if it's going from full time, permanent full time to a contract role.

Is the same situational issue with women who are planning on having a family and taking time at the workforce question?

Not. Most banks have a credit policy for that. We're in that if you can provide a letter from your employer to confirm that you were returning to work and what capacity, so how many days a week, you know, what percentage of your full time income you're going back to. They'll factor that into the credit assessment and what you can afford to borrow. And then you just need to ensure that you've got enough cash in the bank to cover any gap of income between when you go on

That is so interesting to know, and so many people wouldn't even think about that, you know. That's why that preparation for you start having a family is so important. On that note, is there a maximum age that someone can apply buy a home as a principal place of residence?

No, there's no maximum age. I mean, you need to be ideally and still working. If you're not still working, then you need to have.

Sufficient be a self funded retire to evidence.

So the bank can afford whatever loan you're taking out. But no, there's no age maximum age.

The next question I want to ask you is how do you get out of a low dock loan?

Don't get one to begin with.

But there are situations where people are time poor, they've got a complicated situation, they're self employed, their money's tied up, you know, in assets that can't be liquidated as quickly as they planned. You know, it's situational and they've had to take that out, and now the situation has calmed itself down. How do they unwind that and get back to a competitive interest rate? And you go back to that.

It can be things like starting a new business and you know you've only been trading for just over twelve months and you haven't got your financials in audio. And that's common. So oh, look, it's the same as any other refinances. Gathering income documentation, tax returns to see if you can then move out of that lowdock line. Ideally you want to be if you are in a low dock loan. Hopefully you're not on that's got high exit costs. High exit costs aren't as common these days when you

Interesting, and so you can actually get out of it. Not the end of the world if you are with a load doc loan. And obviously for listeners that don't know what a load dock loan is, it's a loan that you tend to get a brout with less questions and therefore pay a higher interest rate and sometimes substantially high.

Yeah, you're basically not verifying your income through documentation, so you need to be self employed, have a registered ABN, be registered for GST some instances. Instances you need to have been trading for at least two years to qualify for load docks. We don't do a lot of load dock loans, so it's like a last result it is. But again, and it's similar to what I've said in the past about lender's mortgage insurance a load doc loan. It's an opportunity costeh. If you need it, you need it,

Now, one piece of advice you've always given me and I've always followed, and this goes back I think we're not mid twenties working together, and that is to always check your credit rating. And you always said to me check it, not because of what my credit rating might be, but more about identity theft. Can you explain to everyone why you need to know your credit rating and why you need to check it on a regular basis.

Ye, credit rating is one of the first things that is checked when you apply for finance these days. So it's all online. All of your accounts are linked up to your credit file and are showing your repayment history each month, credit cards, personal loans, home loans, they're all

Okay, that's good to know, and that's something I recommend everyone take ten minutes out other day to go and do. And it's actually quite interesting what you might discover and also kind of gamifies your financial health because you can look at your score and then come back to it in six months time or a year's time and see what's improved. You know, is it higher And obviously they all vary in how they sort of grade you, but it definitely adds a little bit of like healthy competition.

Yeah, it does, because as I said, when line applications are processed now, it's all done online. So as soon as the application goes in, get a credit file check, so the bank straight away grab that your credit file, your credit score, and if you've got a bad score, you can get client instantly. They won't even bother looking at your application. It's just auto to clim So if you're getting ordered a coin, that's bad.

So you then have I guess the benefit of hindsight in checking your credit rating to then improve it before you then go and apply.

Correct because your credit for your credit score is if you've got some negative repayment history on any of your financial accounts, it'll take it can take up to two for that to then clear off your file get your score back up, So it's on there for two years and that's just bad repayment history. But obviously if you've got a default or a judgment, you know they're on there for seven years.

All right, paperwork? I know I always ask this, but just to let the listeners know, especially if there's any new listeners. What do you need to have from a paperwork point of view to apply for a homeland? What are you going to tell me if I call you and say, adam money to make an appointment, I need to refinance or I need to I want to buy it home. What's the list of things you're going to ask?

So let's just do basic. You know, a pair O ygen employee. First thing, the most important is one hundred points ID ideally a passport and a license, both the current last two or three pay slips, bank statements, six months worth of bank statements showing your your monthly spending, so your monthly habits. That's just a very basic level if you're looking to buy it, but if you're looking to refinance, then it'd also need months of your homeland repayments credit card statements.

So really not actually that my heart.

No, it's not at all. It's it only gets deeper and more complex if you're you know, in a unique employment situation, maybe getting commissions or bonuses or over time, in which case then we can look for additional documents like you know, your income and your income statements, which we used to call group stifficates that the employer would issue. That's now linked through your mind go ounce. You can download your income statement from there.

So it's actually pretty easy.

It is, and there's so much There are so many user tools that we've got now to assist with that, like data scraping for bank statements, so you basically there's a few different providers. They're safe and secure. So just to give you a quick idea. Basically, we give our clients a link, they jump into the link, log into their select with their bank is log in. They're not

Back to our So it literally takes ten minutes.

Two.

Yeah, actually I did this, so I know it does take it literally too. All right, you touched on saving statements.

Yeah, good question. And you've put a couple of scenarios in there that are relevant at the moment because you know, we see it, we see it regularly, so first home buyers generally need to show genuine savings. When I say genuine savings got at least five percent deposit in your account for at least six months. However, there are some really good borrowing options linked to that now, well, not

That's really good to know. They would take a lot of stress and pressure of people show.

Yeah, definitely, because you're right some you know, particularly with cost of living at the moment, it's hard for a lot of people to say. But if they're given from parents or inheritance that they can use as a bonus, yeah, bus, you know, then it means there are options to get around that genuine savings policy. And it's not available widely available everywhere. There's you know, select lenders that oper that type of thing, but it's available, that's the.

Main thing, and that's something you help people out with absolutely. I imagine you've come across it on a regular basis as well.

Yeah, most people that are looking to buy have some form of savings. You know, it's pretty rare that you see someone that doesn't have any savings and they've got some want to go and then take out a mortgage because it's scary, right if you haven't been able to save and you know, how are you're going to afford

Previously in other episodes, we've talked about those you know, kind of magical formulas that you see maybe people who aren't necessarily experience or qualified, saying, you know.

The ones that don't exist.

Yeah, well the ones that you know, like, use this formula to work out how much you can borrow and this is how much the bank will lend you. And obviously they are not factually correct. You could loosely say use it as a guide, but you know they're actually a little bit misleading. What calculators do you recommend people use, you know, the stereic clear of the fancy magical formulas, which are basically a load of crap. But there are calculators online that you can use, you know, on the

About On our website, we've got must be twenty or thirty different calculators, so you'll find them all on there. You know, how much can I afford, what's my borrowing capacity? Things like that. It's good just to play around with, but really be serious about buying, go and see a broker. Yeah, because all it takes is if you get emotional about seeing a property online and you want it, and then the real estate agent talks to you and says, I don't worry, you can put an offer in and we'll

And you should be rocking up to if you're doing property inspections, you should have all of those ducks lined up so that when you see it up with you and you can quickly jump on it because these things are time sensitive, especially in a competitive market like this.

Absolutely, and as a broker who cares, I can tell you as well, it's really you know, it's really disappointing as a broker if we let a customer down by not getting the approval through. The approval through in time.

So but at the same time, they have to allow you the opportunity to get it done in times, rocking out the day before.

But even if they come late, it's still you still feel like you haven't been able to deliver, So it's disappointing. So yeah, that's why I encourage everyone get in get the approval through. There's no fee doing it, So why not?

Now is there a bank that most people prefer? Like do you find people go I hate that bank or can we please go with that bank? And the record is remind everyone this is not product advice whatsoever. But I'm intrigued because there's so much bank bashing going on,

Yeah? Look, there's it all stems to know, experiences, having bad experiences for being turned away from the bank and then good experiences for being attracted to certain banks. So you've got you know, customer satisfaction surveys, you know, who are getting which banks are being a highest up that list year after year. You know, I see Bend to Go and Adelaide Bank are up there quite a bit with that. Who I think are a good bank? Macquarie Bank.

We're not bank bashing here, That's okay. I'm just intrigued.

That was my question, and the chops and changes too, because you know, banks and non majors or second tier lenders, they all go through different periods of seeking market share, and whether that be the reporting the shareholders or just timing of wanting to take on more market share, they come out with more aggressive offers, better rates, better offers, discounted fees and things like that, and with that they become popular.

All right. The next question I have for you is I know the answer to this, and I was horrified when I saw this question, but as I promise people who DM me the questions on Instagram for you, I have to pass them on to you. And this question is can a home loan be paid with a credit card in order to maximize my credit card points?

Finally, no, unfortunately not And look at it probably gets to the point where it did you know you'd have your fees associated with doing it that would make it not worth while you're basically purchasing points.

All right. Next question is can you include stamp duty? In your mortgage application.

I'm a bit confused by that because you have to include stamp duty if you're buying. So yeah, it's all we're when we're assisting clients with a purchase, all the fees and charges are inclusive in our proposal. The last thing we want to do is miss or overlook.

Stamped You to forget about stamp That would be nice to forget about stamp duty, but it is a very expensive entry to property, all right. The other question I received was when it comes to recommend it recommending consolidating bad debt, you know, such as outstanding credit cards that just don't seem to be ever you can never get on top of, or you know, buy now, pay later that's caught you by surprise, or even like personal ozed car loans that have you just not quite gone to plan.

Look, the I would say, you know, just thinking about the you know, deciding when the time is to consolidate them. Say, for example, you've got a credit card and all you're doing is making the minimum payment each month on that and not making inroads to reducing it faster. That would indicate to me that it's going to take you ten years to pay off that credit card. So twenty two

It also makes you more honest because consolidating into the homelan will and I'm purely thinking about the psychology of money here. Yeah, it kind of like sweeps it under the map, the Yeah, whereas you can see that loan sitting there separately, and it's almost like, you know, a bit of a flick where you're like, Okay, that's the raw reality of my silly purchase of a car that's appreciating asset that I borrow it and should have done. I'll take ownership of that,

Definitely great points. Yeah, being responsible and there decisions you made, so yeah, if you're hiding it into your mortgage, you're right, it's the truth. Hurt.

But this is where we learn the most about money, and you know we're open to it. Become wiser and smarter. All right. The next, second, last question, This was a brilliant question and it was from someone who has ADHD like myself, and I thought the discussion was brilliant. Why hadn't thought of this asking this myself to help reduce temptation? Well, remove temptation? Can you reduce your limits slash available funds

Yes you can. It's just a fine call to your bank. Basically, requesting them to reduce the limit. And you know, that's if you don't want to do debt recycling, because if you've built up that redraw in your line by paying additional lump times off, that's great. If you don't want to debt recycle, call the bank up, get them to reduce the limit. Downside to that is that if you then had an emergency and needed the money, you can't get it.

Back, you would reapply that to reapply, that's right.

But if you're doing it to reduce temptation stop that spending, then yeah, that's certainly an option. You can just call and cancel it.

Yeah, and you don't have to reduce all that remove all of that money. You might have to say seventy thousand dollars in your redraw facility or offset account. You might reduce it by fifty thousand, so you still have twenty there. Correct then, but it is definitely I would imagine a great way of just removing that temptation or reducing that temptation to go and blow it. And you know, but obviously got to make sure you still have your emergency money set aside.

One d per and that's when you see people paying off their line really quickly, getting rid of redraw without spending it or using it, because you generally find find.

A way well, there's always something to go.

Percent of the market would find a way to spend.

It, exactly. And look, I have myself personally before I met Tom and before we combine our flandswer is that something I definitely did was every six months I would call the bank and say, can you just reduce it? And I was only ever asking like small amounts like ten fifteen thousand dollars at a time. And I remember the consult saying you're sure about this, and I was like, yes, please reduce it.

On a handbag, sorry, because you had your on a handbag.

Yes, that is true, but you know, sometimes a handbag is very much in a necessity and I will admit some of my handbag's actually gone up in value. Now. The final question is is what are your thoughts on credit cards with home loans where you put everything on a credit card and then pay it off the end of the month. Does it really work in reality or do people spend way more and not really get ahead, Which is actually the perfect question coming off the back of our last one.

Yeah, and these are the conversations I like to have as well. It does work, but it doesn't work, and we out no, well, it works if you're a good budget. If you don't budget and you spend more than it doesn't work because if you use it properly, you earn points on your card, you save interest on your homeland because your wages are sitting in your officet account or

Probably not for you, I have to say, as a financial planner, not once have I ever seen this strategy work. Everyone spends more and they have this kind of laser fair squandalous mindset where they're like, it's fine to put on the credit card, and each month the credit card bill is getting bigger and bigger because they have this like so wid it's fine, just put it on the credit card mentality, and quickly things spiral out of control.

But and then they send out automatic limiting crease.

Yeah, it just it just I've seen it backfire, and I'm probably aggressively passionate about why I don't think it works. And I like simplicity, but yeah, it's on paper it does work.

Yeah, and look I see a lot more than you obviously, so I do see a lot that work. But yeah, it's not it's not something that you can hang your hat on that's going to get you well well ahead on your mortgage. So it's only small, small bit tier in there. But so if you're not very good with credit cards and budgeting, don't do it.

All right, Adam, As always, thank you so much for coming in this morning. It's always I love these conversations with you, as I do never I hope you up

Thanks for having me Kenna.

I love it, and as always, if anyone wants to speak to Adam, please feel free to reach out directly to him his email and mobile phone number. I'll pop in the podcast notes. So, and did it remind you I have absolutely nothing, no benefit at all? Actually I will. I will admit Adam shoutowed me a free coffee this morning. That will be the one benefit that I get from this episode and all my others. But please have a