Is refinancing really worth it? $200,000+ worth of savings from this!

But morning everyone, and welcome back to Sugar Mama's Fireplay. I am your host financial planner Canna Campbell, and today we're talking about refinancing, the free financing one O one, When you need to refinance, why you should be refinancing, and how to do it properly to make sure that you save tens of thousands of dollars maybe even one hundreds of thousands of dollars off your mortgage, that money that can then be channeled into other areas in your

Thank you, Ken.

Can we just get straight into this for the listeners, because I know so many people will get overwhelmed with the idea of refinancing, not knowing when it's the right time. Is it too soon?

You know?

Is there going to be damaged to my credit if I apply to refinanced it gets knocked back? Can we can we just go back to the basics, the one I want of refinancing and explain first of all, what refinancing your homeone actually means and how it works.

Okay, So refinancing is when you change your existing mortgage from one lender to another. Okay, Obviously it pays only to that if you're going if you're going to save money. You know, most people come on the property journey, you know, they get the property they get the loan and then you know, refinance can come after that. The key difference is, you know, when you're buying a property, there's a contract of sale. Sometimes the price is unknown all the very end.

When is the right time to consider refinancing, because you know, some people may have even taken out of homeland six months ago. Is that too soon or do they need to be Is there a sweet spot where they're the biggest savings of say five years in or is it even further like when when do you know it's It's a hard one even as a financial plan, I think, but when do we need to shop around?

Okay? So we with our clients, we have an annual review process. Okay, so, and that's free.

That's part of the service, part of the service, And that's what I explained at the beginning of this episode. People do not understand how valuable that is.

Yea, so so that's that's part of the service. So at least once a year, you know, check in understand where your loan is at, questions such as is it the right rate? Does it still meet your needs? Okay, So it's not all about rate.

Yeah, it's just a good point because, like the setup of a home loan is really important. And that's why I say the right get set up the right way the first time.

Yeah, exactly. So things like annual package fees can get away from you and you forget about them. But then if you understand that there are better options out there, it can make a significant difference.

Definitely, Okay. So what are the key benefits then in refuncing? What is the driving motivation for me to pick up the phone and call a mortgage broker or call you or call my bank?

The key one is comfort? Okay. So through the process, and you may not refinance right, but at least through the process you'll understand is it the best rate that I can get at the moment? Is it optimal? Does the loan still and the banking features still meet my needs? Right? And that to have that comfort and to understand where you're at is critical, okay, And then only when you do that, can you understand if you actually need to refinance? Okay, and so on, one flows through to the other.

It's interesting you say that. The other day someone messaged me on Instagram to say that they did your seven day mortgage challenge at the beginning of the year, and they said they always thought they were being over charged for their home loan on the industry they were paying, but in doing this particular challenge and making the phone calls and doing some research, they actually realize they're at a really competitive rate, and all of a sudden they

Absolutely absolutely. As I said, if you go, if you start the process, then the process will tell you whether you need to refinance or not, right if you ask the questions, if you have a good look at it, and there's a balance, right, so you know, you don't want a broker constantly recommending refinances for their needs because

Okay, all right, do you have any examples of you know, how much you've been able to help people save by refinancing and the impact of having to do a little bit of hard work and obviously the data gathering and form filling.

Well, it's it's not that hard work. It's these days a lot of the documents are electronic and they can just be emailed or uploaded. We've got a portal now where everyone gets a personalized portal and they're just uploaded. So that's one I think that's one important myth that if we can try and get it to that myth today, that'd be great because it's I don't believe it's statifical in this day and age.

I have to say, as a long lover and client of Blue Lantern, I rarely have to do anything because you have so much data on me. It's not like I'm you know, that's a great thing about that ongoing services. You already have eighty five percent of the stuff for me anyway, Yeah, because you've got all my files and it's just literally sometimes a two second job.

That's right to do it. And going back to the example that I was going to quote, So I had I had clients who I mean these clients very busy people and they are they probably will call them unicorns. They had a rate with their existing bank of seven point seven percent, and.

I feel sick.

Well, they because they were using offsets. They thought, oh, well, it's not that impactful. They thought they were too busy. And I just said, okay, even though you're not my client yet, to build a relationship with you, I'm going to talk to your existing bank on your behalf and get that rate down for you without you having to do a thing. And so I got that rate down to six point one five.

I hope they sent you're a really nice bottle of wine.

Not yet, I'm still waiting.

But that savings is huge.

It's massive, and it's massive because they wanted to do something else and the actual high rate was stopping them doing something else. They wanted to buy a property for

And I guess that's another benefit of ter refinancing, because the bank's numbers on the new figures being lower makes your situation look at It is obviously a lot more comfortable. That's right, and you can do other things. You can look at it, you know exactly, and an investment alone attaching to that because you've got your serviceability is now so much better. But the significantly lower interest rate like that.

That's right, that's right. So that's why we started talking about the fact that, yes, rate is important, but it's not just about the rate. Through the process, you know, you can look at things and go, okay, well I've retired some debt. Do I recycle that debt? Or do I now look at consolidating other debts? So there's a there's a bigger picture through the process that can save you money in the mortgage its own right, but then save you money will make you money outside of the mortgage as well.

Okay, can we go through the process of refinancing because obviously you've spoke about and that was a refinancing of someone's existing loan facility with their bank, and you went to fight the bank on their behalf and obviously did an exceptional job. What about you know, someone who's got five years into their home loan. Yep, Like, what does that process look like? Because a lot of people think

Okay, So if you are a PAYG employee, if you get a pay slip, if you can give me two forms of identity, that one I would need a scanned copy of the hard copy because banks don't accept digital copies yet, but that's easier if I can do that on their phone. Yeah, send me a photo of it. It's that simple. Two pay slips, loan statements and credit card statements, complete, a fact find done, I can refinance you. So that that shouldn't take anyone more than an hour.

Yeah. I actually have all those documents saved on my phone already, because there's always situations where someone needs something from you.

All I say is I wish every client was like, I'm.

Sounding really OCD.

I realized, no, it's actually a good point. I maybe this is a good platform to do it. I try when I talk to people, I always try to be financed ready, you know, have your identity documents saved somewhere where it's safe electronically. Know how to get your pay slips bank statements is easy if you if you're set up for restatements with your bank, we can send you a link at the bank statements come automatically to us.

I know for myself, the reason why I have it organized like this is I'm time poor, you know, three kids, my partner's away, you know, away overseas fifty percent of the time. And if I don't do it then and there in the minute, it's going to take four or five weeks for me to get it back to someone.

Exactly exactly, And I think you and I I'll do a higher standard. I think your listeners, my clients would expect that we would be organized. Yeah, because we're not organized, Well, how can we help them be organized?

So okay, you made me feel safe. Thank you for being a socity about But you know, these simple things that do make life run smoothly, and it takes seconds to set up, and once you've set it up on the go, Like the other day, I literally uploaded Apples immunization certificate into my phone. You know, I was like, great, is now there? All right? So so moving on with this process. So you know that data, you know identification process, Then what comes that? Do I need to give you

So once once I have that financial information including your fact fine, so that's where you would have to share with me living expenses because that's an important part of borrowing capacity. Once I assess, then if there is benefit in doing the refinance, I will put three lenders to you. Because the important thing to note is broke as a hell to a higher standard. Then if you go to a bank, a banker I needs to talk about their products. We have to provide you three options.

Really I didn't know that, Yes we do.

Okay, that's interesting, Yes, very interesting. So when it comes to time saving, I'll talk about that later on. So then the way I do it is I work with the clients to help them understand why a certain lender is the best option, and then the house needs to be valued. Property needs to be valued. A lot of valuations these days are electronic, so you don't even have to have a valuer come around and inspect the property.

And just for the record, you guys work with people across the country, yes, and occasionally ever seas as well.

Yes.

Yeah, so it doesn't matter you don't think, well, we're not based in Sydney, John can't help us. That's not the case at all. In fact, everything is done pretty much online anyway.

Most things are electronic and digital. And also we will try and make the process as easy as possible for you. Believe me, if we could avoid you signing a bas of paper, we would, But you know, some institutions need certain pieces of paper signed, but it's getting rare these days.

Yeah, I mean, and as all this is, the whole thing is about efficiency. Yes, can we talk about the cost it does it cost to engage with a mortgage broker? How do they get paid? How do you get paid? Like a hat so that people can understand, like it's the transparency here.

Well, our firm we do not charge any fees. So we have a simple business model whereby if you like what we do and we're successful and in getting a loan for you, we get paid by the lender and that is at no cost to you. And in fact, we would back ourselves that in most cases you actually end up with a better outcome than if you did it yourself going to a lender.

Wow, I like the set of that. Then can you talk me through some common mistakes people make and pitfalls? Like where things have you've seen people go wrong?

Yeah? Well not with us, I don't usually the previous broker that we're taking over it. No, I'm sure wonderful shop.

I mean I've seen I you know, from my financial planning practice, I've seen all sorts of doozies that I've had to get you guys to help clean up with other what other brokers had messed up.

So firstly, the thing is to understand that there are costs of things, right, so there are. There shouldn't be any hidden costs. They should be outlined to you, which is part of our job. Okay, So the costs are. There will be discharge free from your current bank, then there will be some minor government charges for changing the mortgage holder, and then there may be an application fee

Yes, I'm glad that you mentioned this, because this is where people end up just chasing their tail. They just refinance to another thirty year term. And of course there are situations where you have no choice but to make to get the load approved, you need to sign a new thirty year term. But don't make don't stick to that, try and maintain those repayments or increase those repayments.

So there is So this is really important, right because and let me explain it to people. So if you have, if you're currently twenty eight years into your loan term, to reset it to thirty is actually like having a thirty two year loan. That's what you're doing. You're starting, You're you're not in. You're not starting any gown backwards. Yeah, okay, So that's the first issue. The set second issue is that all that interest you've paid in the first two years,

Wow, that is a pretty serious pitfall.

If you ask me, yes, and now I understand your listeners are would be had all different loan sizes, and if they're saying, well, at eight hundred and fifty thousand alone, I would never get an eight hundred five thousand alone. Well, let's look at a five hundred thousand doll alone on a five hundred thousand alone, restarting the term. The extra interest you're paying is forty seven thousand dollars.

Okay, well you heard here first, and this has been beautifully explained by Johnson. Thank you. What about knowing whether you're on the right home loan, you know, when it comes to refinancing, how do you feel in your gut that this is actually the right move. You've got to regret because some people are quite emotionally tied to their banks.

Don't My simple answer is, and I suppose it's easy for me, except the every day, don't be emotionally tied to it. It's it's the mortgage is the vehicle to your dreams. It's not the dream, right. And so I've had people say, you know, I'm a X bank person or I'm a X bank person, and I just go, what do you what are you doing? Do you really think that bank is sitting there going, yeah, well, we love you person, we're thinking about you. They're not going to assure you.

And you've got to be streets mut well, yeah.

Whatever term people want to use, but I would I would take gut out of it. And it's it's a it's a financial equation. It's as simple as that.

I think sometimes people think, oh, you know, but I got all my direct debits set up, I'm going to change banks, I'm going to have to get a new ATM card, you know, update all my details and suscriptions. And it's actually that mindset is completely wrong. If he's just that mindset is costing you a huge man money.

The best way you can help people is by giving me examples. Okay, so I've quoted this example before and it's a very good example in that I had a client who came off a fixed period. They got a decent offer of a rate from their current lender, and this is this is one of my clients. So I do refinance my own clients if the situation is right, but it's always on the basis of I'll put the numbers to the client and then we make the decision together. I never forced them to do anything. I just make

Yeah, and as someone who's recently refinanced, is actually really not that hard. You just look at your direct debits and a lot of it's done not even with a phone call, it's done online. And if you miss one, you always get a notification this is dis bounced or this didn't go through all this is outstanding. You then know, okay, miss that one. I can go and update my new details. Now it really doesn't we're making it out to be a bigger job than what it is in our heads.

And not to steal your thunder, but I've had clients who when they've gone through the process, they've gone to off save money because I had on all these direct debits that I didn't know what I was paying for, and I've just canceled them and now I've saved more money.

So well telling them to reply that to about frayments. Okay, And finally, you know, like what do you think of people trying to do it themselves? Think do people actually try and do their own lending? Like, I mean, how someone's got way more time than they have they to go and try and do that homely, But to people actually have a go at doing this themselves.

Yeah, yeah they do so. So currently seventy percent of loans in Australia are managed by a mortgage broker. So therefore three out of every ten people are still doing it themselves. And that's okay, that's that's their choice. Okay.

Okay, simple as that.

Yeah. Two, we do the work for you right and work, I mean that important part of doing the mortgage health check first, right, that way, then you get you should get a better understanding. Or if you're go and do it refinance, why okay, some other things as well. People need to know. So if you want to shop the market, you want to go to three lenders, well that's three times the work for you. Whereas you're dealing with one broker, it's.

They're doing it on your bar. If you're like a private you are like a personal shopper.

That's right, that's right.

And the personal shopper that does you're shopping every single year for you.

That's right, that's right, checks that the goods are still working for you. Yeah, if that makes sense. There's another important aspect to you that people often don't understand that everyone in Australia who has saw credit, has a credit file, has a credit score, has a credit report, and if you go and apply with three different lenders, that harms your credit score because it looks like you are getting declined for loans and then your credit score will diminish.

Oh god, that's definitely a pitfull a mistake. All right, Look, everything you've shared has been so incredibly insightful, and I feel like I have learned so much as well and myself and I feel motivated to obviously keep working on my mortgage and make sure that if we have a refinance again, if we do it in the right way, into our financial advantage. And I love what you guys do and the guidance and the education that you give

A mortgage health check, check your own mortgage and then understand whether it's it's still meeting your.

Needs, and if you aren't quite sure, reach out.

Reach out so you know, a problem shared is a problem halved. And also you know, well we will look at it dispassionately and from a from a numbers perspective and put those numbers in front of you so that you can make an informed decision as to whether whether it's worth refinancing or not.

And again coming back to that comfort knowing you know you've had someone look at it and it's okay or it's not, and what to do about it, and when to do something about it, and if that means coming back to you in six months time or getting stuck into it straight away and getting it fixed immediately. These are these are a really important building box that are going to get you back on track in your whole entire financial well being.

Yeah, so it's it's a good point. So I have a client who they're coming off the fixed period. They can't refinance yet because he's just changed jobs. And so what what I've done is get the best possible rate from his current lender, which could be better. But then we've diarised that once he has enough enough over time on his pace slips, we'll come back to it and then and then look at the refinance refinance again. So

Bortgage reduction coach.

I'd like to think. So, I'd like to think, so, look.

Thank you so much for coming in today and imparting all this wisdom and this important information for people to see the value of refinancing and asking for a better deal, getting a better deal, making sure you are not being ripped off, to be perfectly honest, and you're actually using