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The Finance Show With Joe
Welcome to the Finance Show with Joe hosted by It’s Simple founder, Joseph Daoud. We chat about the financial issues facing ordinary Australians from managing the cost-of-living to investment strategies in order to help you make more informed financial decisions.
Join us as we discuss finance, mortgages and home buying in Australia!
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The Finance Show With Joe
Are Government Policies Actually Going to Help You Buy a House?
The boys discuss the government schemes that can actually help you get into the market and start building wealth.
Find out:
• Why someone earning $90,000 with HECS debt takes home approximately $5,200 less annually than someone without.
• What you can do if your HECS debt is stopping you from buying a property.
• Info on the federal government's investment of $182 million in NSW infrastructure to enable 25,000 new homes.
• Suburbs like Goulburn will benefit owner-occupiers priced out of Canberra.
If you need help with your home loans, refinancing, or purchasing your first home, visit us at www.itsimple.com.au.
Follow us for more property news and mortgage advice!
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DISCLAIMER This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs before acting on it.
the issue with ignoring hex debt is it's still a debt, it still has interest. I hate the fact that they're punishing kids okay for it, and I hate the fact that I know I know personally firsthand people under the age of 30 that are trying to make it okay, that are trying to build wealth and they're trying to create an opportunity for themselves, and they're getting punished is this good news for people trying to get on the popular ladder, or is it just good news for investors?
Speaker 2:what's your opinion?
Speaker 1:I think that you're an investor. You're looking for two things cash flow and capital growth. Go look at apartments in mumbai 2016. They cost 800 grand 2025 850 they didn't grow that much.
Speaker 2:Obviously, housing policy it's a big issue right now. Do you think that this is something that will actually help people get into homes sooner?
Speaker 1:So I'm of the personal opinion that Welcome to the Finance Show with Joe.
Speaker 2:He's Joe, I'm just some schmo named Michael, and today we're actually going to be talking about a couple of things more so about first-time buyers and younger people and how that helps them in the market, Because Jim Chalmers, our federal treasurer, he has literally told lenders to ignore hex and help debts when doing their debt calculations, which is huge, because last year they got rid of that crazy indexation rate. That happened when, because it was the indexation was based on inflation, was it or CPI or something like that?
Speaker 1:It was based on inflation prior to them bringing it down to a different rate.
Speaker 2:It's a different rate now, but anyway that went down. So they're really trying to improve first-time buyers' capacity really, because I would say that's probably the majority of people who have a hex debt right now. Am I correct in saying that?
Speaker 1:You are correct in saying that. Very interesting that he's come out and said this and, regardless of what he's saying, you shouldn't account for it and you should base the individual's income on the income. That's not how the fucking world works, jim. I'm sorry to say this, but I would love to be able to ignore hex debt to be able to help individual borrowers. The issue with ignoring hex debt is it's still a debt. It still has interest. It's no longer that 0.1 interest that it used to be. I think last year was three percent the year before was like six, it was something stupid right, so to say oh no, we're going to ignore this debt completely.
Speaker 1:It's uh, it's not going to happen. It's an empty promise. The it's the. The treasurer has come out to say this to win favor amongst young people. However, I will add that the lenders calculated incorrectly, so I almost got fired at Macquarie for this.
Speaker 1:I'm just going to highlight this argument that I had eight years ago. Okay, okay, it was myself, 20 people from credit, everyone in the direct team and everyone in the private team, and I put my hand up and I said why are we not including Hex in monthly expenses? And it started a riot. It started a two-hour argument of why we should not be included HECS debt in living expenses. Okay, because this is not something that the individuals at uni have control over. At the time, it was not something that had a high interest rate. We saw, a couple of years ago, people paying like 6% or whatever it was, on their HECS debt. Back then, back in 2018, it was 0.1%, so it was a bit of monthly expenditure that it wasn't a debt to a car, it wasn't a personal loan. It was something to help them in their education yeah, in their education.
Speaker 2:Yeah, and the careers hopefully.
Speaker 1:A hundred percent. I had the head of credit say to me I'm going to check every single one of your files moving forward. I'm like why. I want to understand why we cannot include this in the weekly expenses. The problem also with a lot of lenders is, for some reason I don't know if they've all updated it, but some of them have included a buffer on Hex debt.
Speaker 2:That was another one of the things he was like get rid of that buffer.
Speaker 1:Yeah. So, regardless of whatever the interest rate was, they were adding 2% or 3% on top of that Of whatever your Hex repayments are. They're saying, nah, 3% more. So instead of them paying a, what was it? 3.99%, sure, something last year. Nah, you're not paying 3.99% on your $70,000 Hex debt, You're paying 7%. People were unable to afford property because of that buffer rate. So I'm of the personal opinion that Hex it does need to be included, because somebody that's paying Hex and someone that's not paying Hex if you're making $90,000 a year and you are paying Hex, your take-home salary is $2,500 a fortnight. That's correct. If you are not paying Hex, it's $2,700 a fortnight. Yeah, so it's about $ a fortnight.
Speaker 1:Yeah, so it's about 200 bucks yeah, so it's 200 difference, 200 difference. Multiply that by 26 fortnight 26 fortnights, 5200 a year. Yeah, okay to say oh, no, don't include the hex debt. No, no, you have to include the hex debt. If somebody has an extra 5200 a year to spend… Increases their borrowing capacity. That is an increase of about I don't know, $100,000 or so if they get rid of their HECS debt.
Speaker 1:I can't remember the exact figures, but it's something stupid, yeah, to just say to include it in the monthly living expenses, because it's not supposed to be a rate that spikes up, goes down, and if you see on a payslip, the amount that you pay back to Hex is not dependent on what the interest that they charge is, it's dependent on your salary. Yeah, yeah, yeah. So if you've got a $40,000 Hex debt okay, for example and you're making $90,000 a year, you're paid $200 a week Fortnite, sorry. If you've got an $80,000 Hex debt and you're earning $90,000 a year, you're paid $200 a Fortnite. Yeah, and obviously and it goes over and over $200 a fortnight, yeah, and it goes over, and over $250,000 Hex debt, you're still paid $200 a fortnight.
Speaker 2:Yeah.
Speaker 1:Yeah. So the way that they're calculating it is incorrect. The way the banks assessed it is completely incorrect. I'm on Jim Chalmers' side for one small portion of it, no-transcript. But I'm going to add that this is how they should calculate it. Don't calculate it based on what their interest rate is or what the month of the. Don't calculate it based on that. Don't include a buffer on hex. You're already punishing the youth enough. People that are 30 and under are already struggling to be able to purchase a property and then you're going to turn around and say to them oh no, no, no, guess what. Oldie Mc, old old over there who purchased his property in 1980 and paid off his one thousand dollar hex balance when he, five years after uni or he got it for free or he got it for free, he's completely fine.
Speaker 1:Yeah, okay, but the person that's just gone to uni, done it tough for four years, relocated everything. No, no, no, we're going to punish them for it. Yeah, guess what oldie mc old old is going to look at the apartment that you know the young kid wants to buy and say, oh, that's a good investment I was gonna say yeah yeah, that's gonna make me 600 bucks a week. I love that and then the other kid is gonna go, but I wanted that house I wanted to live there.
Speaker 1:I wanted to live there. I wanted to get out of there.
Speaker 2:I don't want to be paying someone rent, so this is where we're at rent-a-festy, but then you don't have the money.
Speaker 1:Yeah, there's so many things, so I'm going to be a bit rage-baity right now. Yeah, no, and I'm just going to highlight it. You can't ignore it. But you also have to factor it in. You have to factor in how much hex do they pay based on their income level? It's fucking dumb.
Speaker 2:That makes sense as well, because, well, like you said, it's it's it's a huge difference. Because it's it's it's interest in a sense, but it's not pay like again, you don't pay more if you don't earn more.
Speaker 1:So, yeah, I'm gonna give you the the best fucking example. Listen to how passionate I am right now because I'm so agitated I didn't know this hex thing would get him going like this.
Speaker 2:I fucking hate it, I hate I hate hex.
Speaker 1:I think I think the way that the lenders assess it is stupid. I think the way that the government assesses it is stupid. I hate the fact that they're punishing kids okay for it. And I hate the fact that I know, I know personally firsthand people under the age of 30 that are trying to make it okay, that are trying to build wealth and they're trying to create an opportunity for themselves, and they're getting punished yeah, and it especially sucks too, because they were told that going to uni was a way to, to do it like to, to earn heaps of money and get ahead in life my kids becoming a plumber?
Speaker 1:no doubt, no doubt. Year 10 bang plumber. My degree is in economics and maths. Do you know what you could do with that? It's the most generic degree ever. I'm a mortgage broker now. It is so freaking generic, oh goodness. So why did I go to uni and pay a thirty thousand dollar hex debt? Yeah, for for what?
Speaker 2:for something something I'm I'm now business owner. You didn't need to go to uni for that. I didn't need to go to uni for it.
Speaker 1:I didn't Do you know how long it takes to become a mortgage broker, a qualified mortgage broker? A couple of months. I wish it's a two day course. I said a couple of months, it's a two-day course.
Speaker 2:I asked that a couple of months.
Speaker 1:It's a two-day course to become a qualified mortgage broker. Damn, and all of these companies. I'm rambling, liam. I'm sorry, put it on the edit room floor. It is a two-day course to be able to handle somebody's life savings. It's a two-day course to be able to create a mortgage for someone. It is a two-day course to be able to earn that high of a commission, all of it. I didn't need my degree in economics and maths. It's good that I have it because I can look at things and problem solve them quite quickly.
Speaker 2:Your brain is now wired to think a different way, which?
Speaker 1:is beneficial. But to become a mortgage broker, it's a two-day course and I can guarantee you. I can guarantee you the top 30% mortgage brokers I'm not talking the top 5%. The top 30% mortgage brokers are earning a lot more than 100% of the economists out there, Guaranteed. Anyways, back to what I was saying. Fuck, what was I saying?
Speaker 2:I don't even know anymore, but I'm taking it back.
Speaker 1:So this is back to my example. I had a client last year Okay, love this client. Kn my example. I had a client last year Okay, love this client, known them for 15 years. Okay, I see them every day at the gym, four in the morning. Okay, they're working out. They approach me and they go. Hey, I want to purchase another investment property. Fantastic, had a look at their job Owning good money. They've got their Hex debt left over. Fantastic, and they've got their property. They've got a red brick apartment over in Genali. Okay, property's growing in value. They want to refinance. They want to purchase another investment With the Hex debt $40,000 Hex debt. The maximum that they could borrow was $399,000.
Speaker 2:Which isn't getting you anything.
Speaker 1:Not only that, their mortgage was more than that because of the increase in interest rates, oh yep. Okay, yep, okay. Without the hex debt, they could borrow $500,000. Which might get you an apartment somewhere. Make that make sense. You've got $40,000 in hex debt, so their overall debt level was $440,000. But if we got rid of the HECS debt, they could borrow $500,000.
Speaker 2:So there's, a $60,000 increase.
Speaker 1:Their HECS balance didn't go down because of these stupid interest rates. Because if they were making repayments based off what the interest rate was and the principal and everything, okay, they could eventually pay that HECS debt off. But all they're doing is just paying interest because they've changed the way that HECS debt is assessed by the government and because of the wage levels. So instead of us saying, hey, can you stay put and wait until the interest rates come down, we created the opportunity for them. We said to the lender hey, we're actually going to refinance them and we're going to pay out their HECS debt. Here is the b pay slip for you to go and pay out the hex debt forty thousand dollar balance. Then, all of a sudden they've got sixty thousand dollars in equity. Yeah, they could purchase an investment property making money stamp duty and guess what?
Speaker 1:their take-home income was even higher as well. They increased their cash flow. Yeah, they increased their cash flow by getting rid of that hex debt. I think that we increased the cash flow by like $3,000 as well, so there was $63,000 better off. It's amazing. So when I get people say to me should I pay my hex balance off, is it going to give me a better borrowing solution? Yes, yeah, if you have the means to pay off your, pay it off.
Speaker 2:Yeah, okay, okay, because it's going to open up a world of opportunity for you, even if, even if all it does is improve cash flow worth it improves cash flow.
Speaker 1:It improves your borrowing capabilities, it improves your opportunity. This two's $200 a fortnight Okay, it doesn't sound like a lot like in the grand scheme of things, it's the little things. $200 a fortnight is $5,200 a year. $5,200 a year, that's a holiday to New Zealand. Maybe you need a mental break. Camera equipment upskilling yourself, starting your own business, creating a side hustle $5,200, ailling yourself, starting your own business, creating a side hustle $5,200 a year could definitely go towards that. Yeah, invest in yourself. Investing in yourself yeah, so roundabout, long way to give you an answer. Pay off the hex, yeah, okay. And an answer to the banks as well. Hey, guess what? Change the way that you assess it. It's not based on interest, it is based on it's not a normal loan.
Speaker 2:Yeah, it's not it's not a normal loan it is not which has benefits and drawbacks, as we've just explained. Yeah, now speaking of benefits and drawbacks and where to put your money that's an amazing segue.
Speaker 2:So after my uh 20 minute rant, there are 25,000 homes set to be built in New South Wales, and it's not literally the houses being built, it's a lot of infrastructure stuff, which isn't sexy yes, it is, but it is essential Now, and this is just New South Wales. This is part of the overall federal government's housing support program. You remember that 1.2 million homes thing? Yeah, this is part of that.
Speaker 1:Nice.
Speaker 2:There's $182 million being invested in New South Wales in these suburbs. So Kempsey $45 million, goulburn $27 million, griffith $10 million, cessnock $22 million, moruya $4 million, parramatta $10 million, schofield $13 million and Dulwich Hill $6.2 million. And that's all for infrastructure, basically New roads, water treatment, stormwater stuff, those kinds of things. Not sexy but it does unlock potential for new homes.
Speaker 1:That's amazing.
Speaker 2:Is this good news for people trying to get on the popular ladder, or is it just good news for investors? What's your opinion?
Speaker 1:It's good news for both, and the reason I want to highlight it's good news for both is the suburbs that are being taken on. Number one is Goulburn. Canberra has become too expensive to live in. Too many roundabouts.
Speaker 2:You've got to pay to upkeep them.
Speaker 1:But Canberra it was a hotspot. Property grew in line with Victoria and New South Wales over the booms. I think the median house price got to like 1.2 million 1.3 million. So a lot of people in act found it too expensive yeah yeah, 40 minutes up the road on highway. Highway driving is different city driving. 45 minutes up the road on a highway, you have have Goulburn. You're buying for a third of that price.
Speaker 2:Yeah, and you get the big ram. So, you get that too, cut that out.
Speaker 1:Goulburn, for example. I've seen a lot of my own clients purchasing Goulburn.
Speaker 2:Okay.
Speaker 1:Property's going up in value there. It's a great spot. This investment is probably going to unlock more land down there. Yeah, you have a lot of government workers actually finding it easier to drive from certain parts of Goulburn into Canberra than from purchasing somewhere on one of the outer suburbs of Canberra and then driving in.
Speaker 2:Yeah, okay.
Speaker 1:So Goulburn, I think, is going to benefit quite a lot on both the owner-occupied and the investor side.
Speaker 2:Okay, Well, I mean the government estimates say this is going to be about 430 new homes, that's fantastic.
Speaker 1:Yeah, a lot of Goulburn is old, a lot of it is heritage. By providing that infrastructure, it's going to open up the market for a lot of people. Yeah, I think owner-occupied people are going to benefit the most in Goulburn 100%, because it's not really an investment hotspot.
Speaker 2:Although, if it becomes more general knowledge, if you're working in Can, if this, if it becomes more general knowledge, um, if you're living in or working in Canberra to that is cheaper to live in Goulburn than Canberra itself. Maybe we might see that change.
Speaker 1:Parramatta Massive winner, Massive winner Parramatta's the second CBD. I have have you gone to the new Parramatta square.
Speaker 2:No, I've just been on the train in the station, so I kind of whatever I can see out the window.
Speaker 1:It looks like Sydney CBD.
Speaker 2:Oh yeah, it definitely does. If I'm not paying attention, I think I'm in central sometimes.
Speaker 1:Yeah, it is phenomenal. If they want to invest in it, make it the second city, make it the second part of Sydney. They've done a great job.
Speaker 2:Well, they've got yeah, they've got that light rail now as well.
Speaker 1:So previously about light rail now as well. Yeah, so previously, paramata had an issue with oversupply of apartments. Yeah, yeah, what this infrastructure project is going to do is it's going to open up a lot of travel between paramata, cbd and sydney, cbd and potentially other suburbs, and it will allow paramata to become more of a hub and it will provide ease of access for people, yeah, who need to work in that area, and paramount is a pretty convenient location it's fantastic yeah, so this is um.
Speaker 2:This will enable estimate estimated to enable 15 000 homes it's fucking sick um scofields.
Speaker 1:Same as the other stuff I was talking about before. Yeah, you know an 86 meter bridge yeah, I'm not.
Speaker 2:I'm guessing it goes over the hawksbury or something like that, Because I live near Schofields and I'm not really sure where that bridge is supposed to go. But that $13 million is supposed to enable 235 new homes.
Speaker 1:Dulwich Hill 7,800 new homes. That's huge. So Dulwich Hill next to Marrickville Enmore, I feel like it's all in that area in and around the inner west yeah, the inner west is all heritage yeah, which is, I think.
Speaker 2:So, what they're doing. They actually, as opposed to the other ones. They're actually doing a transport tunnel under old canterbury road, yeah, and that is then supposed to link each side of the road in different suburbs, where they can. I'm guessing the heritage isn't that prevalent, or maybe they've already knocked down, or maybe they're just changing the zoning. I'm not really sure. I don't really know how the 7,800 new homes thing will fit.
Speaker 1:It's going to be apartments. Surely right, it has to be. It's going to be 20 lots of apartments. Each block is going to have God knows how many, but that's actually better for owner occupiers than investors. Now, it's a decent spot to live in.
Speaker 1:We spoke about it countless times on the show yeah if you want to buy and make money, go for something that's got land. If you want to buy somewhere that you want to live, go and buy an apartment. Yeah, okay, because apartments low upkeep, you don't have to go mow the grass, you've got to pay strata. Nobody likes to pay strata, but that is the cost that you pay for that sort of convenience. My opinion is, the biggest benefit for Double Chill is actually going to be people that are looking to purchase unoccupied properties, as opposed to potential investors. When you're an investor, you're looking for two things cash flow and capital growth. Yeah, how did I forget?
Speaker 1:that um but you're looking for those two things, go look at apartments in bombay 2016 that cost 800 grand 2025 850. They didn't grow that much okay okay, go look at apartments in paramount 10 years ago, 700k. 10 years later, 770, something along yeah, yeah, yeah, so it's.
Speaker 2:You're not seeing. I mean the apartments in australia. Never see that explosive growth. They don't land prop like houses they don't. But apartments are great for depreciation and they're great for cash flow yeah, or you just want, like rent, if you can get that thing positively geared yeah, yeah, or they're great to live in yeah, and personally I think I'm an apartment dude.
Speaker 1:Yeah, you see, yeah, you like apartments, you like the ease of living, you don't want to be jumping outside, I don't want to drive I don't want to drive, that is that is exactly what I wanted to hear. Yeah, so dullwood, chill that 7800 uh new homes project. Yeah, that is made for you. You don't want to drive too far. You want to have the ease of access to the city? Yeah, to other locations, okay, and you want a low maintenance lifestyle.
Speaker 2:Yeah, essentially I hate mowing grass.
Speaker 1:So Dulwich Hill is going to be made for those young Australians Now. Will it grow in value because of its proximity to the city? Yes, yeah, okay, but is it going to explode in value like a house, land, duplexes, those sorts of things? No. So I think the owner occupiers the youth. You and your fiancé, you want somewhere to live close to the city. This is going to be a great option for you. That sort of area. Our videographer, liam, this is going to be an option for him if he wants to live close to Sydney CBD.
Speaker 1:My wife and I, if we were 10 years younger, we would probably be looking at delwich hill. We would be looking at that area because it's central, it's close to family you know there's dayudes everywhere like we'd be fine, it's a it's. It's an important thing. It's an important thing. So, rather than thinking of it as an investment, it's going to definitely be an occupier area and I think that is the best way to look at that. So, yeah, you have to look at the suburbs. Is it going to definitely be an owner-occupier area? And I think that is the best way to look at that. So you have to look at the suburbs. Is it going to be good for the owner-occupiers or the investors. Dulwich Hill, it's all going to be vertical moving. It's going to be great for the owner-occupiers Schofields. It's going to be great for the investors because that's unlocking a whole new area, different land, and that's going to create connection ease of access. That's going to be great for somebody that's looking to invest and make money in capital growth yeah, that makes sense.
Speaker 2:That makes a lot of sense, yeah, so, by the way, this advice is all general in nature. All right, well, did I give it? Okay, regardless. It's there now, all right. Well, that's, that's great, that is good news. So this, not to get too political, but it's there now, all right. Well, that's, that's great, that is good news. So this, not to get too political, but it's like, obviously, housing policy, it's a big issue right now. Do you think that this is something that will actually help people get into homes sooner?
Speaker 1:yes later. Yeah, like actually effective policy the only thing I'm worried about is we're banning foreign investment for two years.
Speaker 2:Oh the foreign investor ban yeah.
Speaker 1:On existing properties.
Speaker 2:Well, they're just going to buy this up, yeah.
Speaker 1:That's the only thing I'm worried about. However, we have seen a lot of Chinese investors. They've exited Australia, not completely, no, no, no, just lesser rate, yeah, but they're looking at markets like Dubai, saudi Arabia, qatar, you know, where foreign investment tax is a lot lower and you know.
Speaker 2:Populations are smaller and they're not really crying about housing crises and stuff.
Speaker 1:But you're also seeing a lot more capital growth. Yeah, yeah, people are moving to those countries in droves, like, especially, digital nomads. They are picking up, they're going to Dubai. They don't have to pay tax, they can set up a visa the golden visa and live there for 10 years and essentially have a thriving company and connect with a lot of people who are looking for similar opportunities yeah, that can make sense and the funny thing about dubai is there's no dull bludgers.
Speaker 1:You work there. Yeah, you have to make money or they literally kick you out of the country. Oh you, you live here and you're not working out like it's people. Police will come and knock on your door and kick you out of the country. Oh my god it's a, it's a very strange place oh well, bloody hell.
Speaker 2:I've only been to the airport. That is all I can say about it.
Speaker 1:To wrap that up, yeah, I'm hoping, because they're new properties, we won't see too much of a foreign investment boom. You will see a little bit because their market is limited. But depending on the area, speak to, I want to say, a buyer's agent. Don't speak to a real estate agent. They'll sell you anything, yeah.
Speaker 2:Go to a buyer's agent.
Speaker 1:Speak to a good buyer's agent. They'll put you in a good position and go from there.
Speaker 2:Okay, Well, that sounds great. Well, going from there, let's do our favorite segment of the show the client profile. I won't throw you a curveball this time. This is a far more reasonable one. All right, so we've got Debbie and she saved a 20% deposit and has approached you to get help for a loan for a property that she's already got her eye on. So while in the process of getting pre-approval from a lender, Debbie finds out the property that she wanted has actually already sold and she's now spent a solid amount of her deposit on luxury items like Gucci handbags. I actually overheard this. Joey once did this. Now she still wants to buy a property, but with a reduced deposit. But she doesn't actually want to go for a cheaper property, she wants to keep it at the same level. How would you guide Debbie?
Speaker 1:I'm honest with my clients and I'm transparent. I'm going to tell her that she's just fucked herself. Yeah, you ruined it, Like she's actually I'm not going to say it in those words, but she's essentially gone and ruined quite a few things. Because, number one now we can't see if she's a responsible spender.
Speaker 2:Yeah, yeah, and banks are going to see that, banks are going to see that.
Speaker 1:When we are reviewing the bank statements, we are going to see an exorbitant amount spent at Gucci. Then we have to question the deposit because it's a 20% deposit and that has now reduced. Let's say it's a 5% or a 10% deposit. Banks are going to want to know genuine savings Now because it's no longer a 20% deposit and that has decreased. Her interest rate is going to go up because banks lend based on the tier. Yeah, the less of a deposit you have, the higher risk you are.
Speaker 2:The higher risk you are, the higher interest rate that you have to pay yeah, standard practice and on top of that the lender's mortgage insurance yeah, which you have to pay if you don't have a 20 deposit depending on the lender.
Speaker 1:Depending on the lender, yeah. So now we've got to get that involved. There are so many issues with what debbie has done and I'm going to tell her can you get a refund? Yeah, I can send it back because there's a chance. The banks are going to look at this and they're going to think that you are. You are an irresponsible spender and you don't know how to control your money. You're going to be late on repayments. You're going to default. We're going to kick you out of your house.
Speaker 1:Damn yeah the banks are there to make money, not kick you out of your house. They don't want to end up on a current affair. Yeah, this is true. The second thing is we have to be realistic. We are going to review the living expenses for the six months prior and we're going to see is this a monthly thing? Was she just given $200,000 to go buy a property? Yeah, and then she lost the property, spent $50,000 on Gucci bags. We're going to look into that as well. Yeah, and then we are also going to decide whether or not we want a borrower like this, because if we have to spend this much time telling someone, don't be an idiot yeah, stop spending the money stop spending money like this, then it's going to be a waste of our time yeah
Speaker 1:okay, there's 56 000 brokers in australia. Okay, if you'll come to me with this issue and you can't control your spending and then the next time we speak to each other and you tell me you've gone and you've spent this money again, I'm going to tell you I'm sorry, I can't help you. Yeah, my advice try steps for the advice. Try and get a refund. You can't get a refund? Okay, put those bags aside. Try and resell them or keep them. You're never allowed to shop at gucci again. Give your photo, tell them to ban you.
Speaker 2:Yep, yep, yep.
Speaker 1:Okay, step number two be realistic. Okay, you've reduced your deposit now. Now we have to increase your interest rate. Now we have to increase. There's a potential that you have to pay a lot of mortgage insurance. There's a whole bunch of other things. So guess what? No-transcript, if we have you pre-approved, conditionally approved, whatever. We have an unconditional pre-approval, whatever you want to call it fully assess pre-approval. If we have that, if we fully assess pre-approval. If we have that, make the offer and try and go for the property. Now you do always have to think about a property. Get your 10-day calling off period, make sure you have a good conveyance or solicitor, but don't go and spend that money. And if you are going to buy that property, make sure you take into account what you're actually doing. You are going to be fiscally responsible for the next 30 years to make those repayments to purchase a house. Don't go blow that money on that sort of stuff. Blow that money on that sort of stuff later. I'm not against people having nice things.
Speaker 1:I like nice things.
Speaker 2:You see what I wear, but I am against doing it irresponsibly yeah, okay, when they don't they they technically have the money, like the figure is in their account, but they don't really have the money.
Speaker 1:They don't realize I know a hundred people that can go and buy a lamborghini. Yeah, okay, I know 99 people that can't afford the upkeep of a Lamborghini. So service a Lamborghini is $20,000, $30,000.
Speaker 2:Yeah, the insurance as well.
Speaker 1:Insurance is high. You can't drive it everywhere. It's impractical.
Speaker 2:You're not going to pick up your kids in school.
Speaker 1:It's a two-seater, you have to buy another car, where are you going to store it Like? There's just so many things that are involved. So you just really have to highlight what is important, what's not important to you.
Speaker 2:And I would sit down and have that conversation. Yeah.
Speaker 1:What are your actual financial goals? What do you want to achieve? Timeline it? It's great that you bring this example up because another case study. Last year I had a client oh man, this was a hard loan, complete financial distress-huh got scammed, superannuation stolen oh, wasn't an accident, was on workers compensation okay, and also told the lender their bank, even though they could afford their repayments. Hey, can you pause my repayments for a second?
Speaker 1:which is already like raising red flags at the lender's side so when you pause repayments, you go on worst repayment history status. So you get an RHI for a year. Oh, no, no, no. You get the financial hardship one, the FHI, okay. So if you've got an FHI on your bank status, that means that you have to wait 12 months for that to be cleared before you can go to a major lender. So our options are already limited. Because her only source of income is workers' compensation. There's like four banks that take that. Oh gosh, all right, four banks that take that. Now, all of a sudden, that has reduced to three. Sorry, that has reduced to one, because she's also got the financial hardship Okay. So they approached me. They said I want to refinance my mortgage, pay out all these personal debts and I want to buy a Mercedes AMG.
Speaker 2:Why when?
Speaker 1:you were already drowning.
Speaker 1:So they got scammed, divorced, all that sort of stuff. But I said to them on the phone and I'll never forget this conversation I go, you go and buy that car. I am not approving this. I am not sending your loan to this lender. I am the only person that has helped you, after you've gone to 18 other people to try and help you. If you want the money to clear out your personal debts, if you want the money to be able to build yourself back up, sure. But if you're going to take that money and put it in a Mercedes AMG something that I now know for a fact that you don't have the money to insure that you don't have the money to put petrol in, Okay, yeah, If you are going to do that, I am not going to approve this loan for you. Imagine, imagine I don't even have the right to approve or not approve a loan. But I wasn't going to submit it. Yeah, you weren't going to help them.
Speaker 2:Yeah, imagine you're falling off a boat no fault of your own.
Speaker 1:You know choppy sea, you're falling in, you're drowning and you go chuck me a bag of bricks. Yeah, the bag of bricks will help.
Speaker 2:Yeah, like it's just when I heard them say yes, I want to buy a mercedes amg after everything else this person had been through. You're definitely not making money.
Speaker 1:You're not going to make money on it, you're going to lose money and you are putting yourself under more financial duress. And I even I know my cars. That particular car has issues so like it wasn't even a good car. No, it was one of the lower end amjs. It was um the a45, I think it's.
Speaker 2:I can never remember the numbers that are attached to it but it was.
Speaker 1:It's uh, they've got issues with turbos and stuff. She's gonna buy something that's a lemon, you know, actually they want to spend 70 thousand dollars on it. So this is, this is the.
Speaker 1:That's exactly what I said I said there's a hundred chiodas online that have the same features. You've got apple carplay, you've got all these things. And then they turned to me and said but I've got divorce hearings and I want to be able to show them that I'm strong and I go. You show them that you are strong, not by showing up in an amg, not by showing up in an AMG. Not by showing up in an AMG, but by showing up that you are strong and that you could pay your legal fees. We submitted it, got it all approved. 12 months later, they have come back. They've made all their payments. Okay, they managed everything. They cleared out all the personal debts that they had owing. And now they've approached me for a car. When things are done and they're no longer on workers compensation, they've got a job full-time. Guess what? Okay, you want to buy yourself a car. Now, let's get you a car, but not when you are under that much duress, and that's how you win.
Speaker 2:At least the story has a happy ending.
Speaker 1:Yes, it actually does we. We actually got them formally approved a few days ago. Oh, there you go now. This is a true story. I can't name names, but imagine how hard I was clicking it when all that stuff was going down.
Speaker 2:Oh my God, You've been tweaking man, but yeah, as always, guys, borrow responsibly.
Speaker 1:Don't drink and borrow no sorry.
Speaker 2:When you borrow, don't drive. Yeah, as always, guys, if you want somebody to help you borrow.
Speaker 1:Don't drive as always, guys. If you want somebody to help you borrow responsibly, what a segue. You can visit us at wwwitsimplecomau. Whether you, your friend, family, you need help with your home loans, refinancing your loans or purchasing your first home we're there. If you want to find us, we're there. I'm tired, tired. You can find us on linkedin. You can find us on instagram. I'm always available and, um, as always, my name is joe.
Speaker 2:I'm michael, you're no longer a schmo I still am a bit of a schmo, you're getting there.
Speaker 1:We'll see you in the next episode time.
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