Chapter 1: Why should Australians consider refinancing their mortgages?
it's the real estate podcast brought to you by anz home loans for financial well-beings and welcome to another episode of the real estate breakfast available on iheart radio every morning and also on spotify and apple and wherever you get your podcast from the weekend it is back again saturday morning is with us the 15th day for october for 2022
And coming up very shortly, we're going to be talking to Andrew Wheatley about your mortgage with a new podcast series called Let's Talk Mortgages and some very useful, helpful hints coming your way this morning on how you can save money. And we are all down for that. And talking of money and saving money, Alec Baldwin, the actor, is listing his longtime Hamptons estate for $29 million US.
He's already sold off his upstate Cleveland, New York lake house back in July, but he's still holding on to his penthouse in Manhattan's Greenwich Village, which is valued at around $16 million. And it seems Baldwin's selling of properties comes less than a year following the shooting incident on the movie Rust.
And recently, Alec Baldwin and the producers of the Western reached a settlement with the family of the movie's cinematographer, Helena Hutchins, who of course Baldwin shot dead during the filming last year. And under the deal, the family's civil lawsuit against Baldwin and others is going to be dismissed. But here is the twist.
The filming of the movie is going to resume in January with all of the original principal players, including Helena Hutchins' husband, Matthew Hutchins, who is now going to become an executive producer of the movie. Very strange. It means that you will have the option if you want to watch it. The movie rusts probably next year.
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Chapter 2: What are the common reasons Australians avoid refinancing?
Well, 23 Australian's refinanced a total of $9 billion in home mortgages in June with the governor of the RBA saying in a speech back in July that he was pleased to see more people switching banks to take up lower interest rates.
Now, with everyone talking about how to save money, particularly in this current climate, why aren't even more people tackling the biggest expense in their budget, the mortgage, the dreaded mortgage? Now, we've talked about this before because it feels like a no-brainer to start with the biggest expense first, but oddly, data shows that Australians stay with their bank on average for seven years.
So should we refinance more often and why are so many people leaving money on the table? Well, here to discuss it this morning is Andrew Wheatley, owner of Wheatley Finance and the FBAA Finance Broker of the Year for 2021. And a very good morning to you, Andrew. Welcome back to the Real Estate Breakfast. Thank you. Good morning, Craig. And is the governor of the Reserve Bank correct?
Should Australians, do you think, be refinancing their mortgages more often? And I think I know the answer to this.
Well, you do know the answer, Craig, and I agree with the governor of the Reserve Bank 100%. It's one of the strangest things out there that Australians don't remortgage more often. The reasons why, well, there's a couple of reasons why. There's a fundamental misunderstanding of how banks operate. And it's almost like we've been trained to behave in a certain way that's not in our best interest.
It's probably easy to explain it like this. Banks give all their best deals to new clients. And I think everybody knows that. When you first go to a bank, that's when you're going to get the best deal. They're going to give you the lowest rate. And if you're refinancing, they'll usually throw in a few thousand dollars of cash as well. But there's a reason they do that.
Mortgages are incredibly profitable for banks and they know that they're going to make a lot of money off you over time. You mentioned that the average loan stays around for seven years. So banks are happy to take a hit upfront knowing that people will not move or most people will not move.
If you believe that, that banks are going to give that best deal to new clients, then it makes sense that you should want to be a new client. And not only should you want to be a new client, you should want to regularly become a new client.
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Chapter 3: How often should Australians refinance their mortgages?
The reasons for refinancing more often are fairly clear. The reasons that people don't do it are a little bit more murky.
And perhaps people need to think about it like this, Andrew, that it's like when you're courting somebody, a new relationship, everything's amped up. And then once you're in the relationship, things settle down. So perhaps we need to be looking for a new relationship with the mortgage.
Absolutely. Look, that's why I say that Australians need to stop marrying banks and start dating them. It's a really good analogy because the relationship we have with banks is unlike any other relationship we'd normally have in any other part of our life. When we get in a relationship with someone, it's because we share the same goals.
But when you get into a relationship with a bank, they have the exact opposite goal of you. You want as much of your money every month to go off your mortgage payment, and they want as much of your money every month to go in interest into their profits because that's That's their job. They've got shareholders. They need to make a profit.
Yeah, so some good points there, Andrew. So with Australians sticking with their bank for seven years on average, and I think that there will be a lot of Aussies surprised by that number, what are some of the reasons that you see firsthand for people putting off refinancing?
The first one is just the time it takes to compare banks. We're pretty conditioned to think that, well, if all the banks suck, what does it really matter? I'll just ring up my bank, see if they'll drop my rate a little bit and I'll just take whatever they give me. And that usually works, except a few months later, they put the rate up and you're back exactly where you started.
So being able to compare banks and figure out which one is the best for you takes time and it can be a real pain. One of the other ones is just moving banks. For most people have thought of moving banks, setting up all your bank accounts again. It's like going to the dentist. You just don't want to do it. Easy solution to that is you don't need to move all your banking when you move banks.
You're just picking up your mortgage, auction off to the highest bidder, move all your savings into the new offset account, leave your bank account where it is, let your pay go where it is, all your direct debits can stay where they are.
And- What would be the one piece of advice that you would give someone when they are thinking about the entirety, I guess, of the mortgage? What's that one nugget of gold that, above all, here it is?
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Chapter 4: What is the relationship between banks and mortgage clients?
What would you say? It's exactly what we've just been talking about. People need to refinance more often. Once you understand how banks work and you're able to know the right time to move your mortgage and the right place to take it to, if you do nothing else, let's say, for example, refinance roughly every two to three years,
The average mortgage will get paid off two to three years quicker with over $100,000 less in interest payments without you doing anything else, without paying any extra money. That's one of the greatest side hustles you could ever come across. Every few years, a couple of hours work and the end result is hundreds of thousands of dollars.
Yeah, that's a great way of looking at it, a side hustle that is going to save you tens and tens of thousands of dollars. And to this point, it's always a good one to highlight what is the benefit of people using a mortgage broker versus calling their bank and saying, G'day, it's Joe Blow here. Any chance of a bit of a discount?
The main reason is you're more likely to actually do it. Refinancing your mortgage is one of those things that is on our to-do list, but you don't actually really want to do it. So you'll find reasons to put it off. But a mortgage broker is going to give you that extra push to do it. And they're also going to do most of the work. So the best reason is you're going to actually do it.
The second reason is you should end up with a better deal. you can go and research it yourself or you can do something with your bank yourself. That's better than doing nothing. But you'd like to think that an expert will get a bit of a better result, especially when there's no charge for it.
All right. So something for everyone to think about, particularly with relation to how they're gearing their mortgage through their banks. And thanks again for coming on to the Real Estate Breakfast this morning. My pleasure, Craig.
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