Q+A: Getting bang for your buck on your home loan

The Australian housing market hit $12 trillion this week. The value has doubled over the past decade, with most of the growth in the past five years.

It’s a hot market, and this spring selling season is no different - plenty of upsizers, downsizers, investors, and of course, first home buyers.

So how do you get the best bang for your buck on your new home loan?

Annie Harrison, Head of Direct Lending at Ubank, joins Sean Aylmer in the studio to talk about what banks are looking for when lending to customers, and how homeowners can set themselves up for success with their property purchase.

In collaboration with Ubank.  Find out more at ubank.com.au

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Episode Transcript

Speaker 1 (00:06):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Sean Almer. The Australian housing market hit twelve trillion
dollars in value over the last week or so. The
value has doubled over the past decade, with most of
the growth in the past five years. It's a hot
market and this spring selling season has no different. Plenty

(00:26):
of upsizes, downsizes, investors and of course first home buyers.
So today, how do you get the best bang for
your buck on your new home loan? Annie Harrison is
the head of direct lending at Ubank, which is a
great supporter of Fear and Greed any Welcome to Fear
and Greed Q and A. Hey Sean, we're going to
do a one o one today, if that's all right.

(00:48):
What is a lender looking for? So let's say I
want to go and get alone. Maybe I'm a first
home buyer, Maybe I've got a family of five kids,
maybe I'm investor. Right, what is the lender? What are
you looking for?

Speaker 2 (01:03):
Primarily we want to make sure you can afford alone.
That's our number one objective. So all lenders want to
make sure that if we lend money to customers that
they can still maintain the lifestyle that they want, right,
that's the number one thing. But really getting into the
nitty gritty, we really want to understand.

Speaker 3 (01:20):
What you owe, what you own, how you.

Speaker 2 (01:23):
Spend your money, and I suppose if I break that
down for you, we think about, Okay, what's your income,
especially is it stable, does it fluctuate? What are your
sources of your income? Have you got a side hustle,
have you got dividends coming in? You know, we want
to see that whole picture of your earnings. And then
we want to go, well, tell us about your family.

(01:45):
So how many kids have you got because the minute
you have a trial, that obviously is an expensive undertaking,
so that can impact how much we can lend you. Sometimes,
you know, five percent in terms of what we can
give you in the end.

Speaker 3 (01:59):
So child counts.

Speaker 2 (02:01):
We want to make sure understand if you do have children,
where do they go to school, what kind of school
fees are involved in that, are they at childcare? And
we have to plan for the full life of that child.
Assuming you're going to have this loan for up to
thirty years. We look at your day to day expenses,
So thinking about that, you know, all those subscriptions that

(02:22):
we all have, that we sometimes forget.

Speaker 3 (02:24):
That we have, they all add up.

Speaker 2 (02:26):
We look at if you have those buy now, pay
later schemes, they count really important to stay on top
of those, even like your basic telco. So you know,
if you've missed one of those bills, we might ask
some questions, but it's you know, it's really important that
we take into account how you've made all those repayments
over time.

Speaker 1 (02:46):
So I must say, we're not my first, my first
ever home loan, and I try to trick the bank right,
not be honest, and then quickly I realize, actually that
doesn't work out because if you say this is my plus,
this is my minus, well, how how long does a
gap beer? Where's all that money gone? And being honest
actually was the best policy.

Speaker 2 (03:03):
Absolutely absolutely, And I think you know, we want to
partner with our customers, right, so I say that underlying,
we don't want to put you in a bad situation.
As much as everyone goes, I want that place, but
can you afford that place? And we want to make
sure you can absolutely afford that?

Speaker 1 (03:19):
Ok?

Speaker 3 (03:19):
Yeah, be honest, that's the lender.

Speaker 1 (03:22):
What about the opportunity I mean the products out there.
So obviously you bank's got your ten percent deposit product
at the moment, but there's also government money, so first
homeowner scheme and federal and state government at different times.
How do you get your head around all that sort
of was there's two sites to that. It's the products
from the lenders and then it's also what's available from

(03:44):
the government.

Speaker 2 (03:45):
So to get your head around that, I think, firstly,
your best to find a good partner in finance. So
you know, you find a good lender or you find
a good broker, and you talk to them about what
your goals are, so you know where you're going. What
do you want to do? Do you want to invest? Do
you want to live in it? Do you want to
you know, look at what's what property, what area is
rising faster than the other? Do you want to fix

(04:07):
some do you want to have some variable? Do you
want to do interest only? There's so many options out there,
and you know, specifically for first time buyers, I think
the whole thing can be totally overwhelming. And that's why
I say up front, find a good partner in finance.
The government scheme that's currently launched is a fabulous one.
At you Bank, we can also help you because that

(04:28):
government scheme isn't for everybody. So we at U Bank
will offer a ten percent deposit loan. Now, if you
think about that, Traditionally there's a twenty percent deposit hurdle,
and most people think about that, and we know our
customers are saving hard trying to get this twenty percent
and it can absolutely feel unobtainable as property prices rise

(04:49):
every year, and we've seen that even in the last
couple of months just this, you know, the increase. You know,
the young Australians think, how the hell can I keep
up with this? How on earth am I going to
get this posits So we're offering that ten percent another
lender stuff for that as well. Let's jump in there.
Let's let's get you in the market now while you can,
and you don't have to pay lenders mortgage insurance, which

(05:11):
if we can talk about all the other bits that
are involved.

Speaker 3 (05:13):
In a line.

Speaker 1 (05:14):
I mean, so lender's mortgage insurance is as I thought, though,
you're just disproving this. If you don't have twenty percent,
then you effectively have to buy insurance to ensure that
if you don't unable to make repayments, there's an insurance
against that. And this is only the beginning. This is
only the twenty percent part of it. How do you
do the ten percent without the lenders mortgage insurance?

Speaker 2 (05:36):
Yeah, it's well, lenders, we price loans based on risk.
So we look at that and we go, Suan, you
look pretty good from what we understand. We'll take that
risk on you.

Speaker 1 (05:48):
And will you fool you go?

Speaker 3 (05:50):
But you were on us with us, right, so right,
and so we will go.

Speaker 2 (05:56):
Well, certainly in this product for this certain set of
customers fulfill the criteria, because it's not for everybody.

Speaker 3 (06:03):
We will go, we'll take a chance on you.

Speaker 2 (06:05):
And as you say, lender's mortgage insurance though, it's actually to.

Speaker 3 (06:09):
Protect the bank.

Speaker 2 (06:11):
Yes, so it's not for the customers, for the bank.

Speaker 3 (06:14):
And what does that mean?

Speaker 2 (06:15):
And if customer goes but it's actually if something was
to go wrong with the loan and the customer couldn't
afford it, and they had to then sell the property,
and during that time, if the price of that property
went down, the value went down, it protects the bank
in that if they had to resell that property, so
it's insurance.

Speaker 1 (06:36):
The premium for the bank's insurance policy.

Speaker 3 (06:38):
Yeah, that's right.

Speaker 2 (06:39):
So that's traditionally what it's for our loan, our ten
percent one. We're going you know what, this is the
first time buyers. We want to help you get in.
We're going to back you in and we'll waive that
because we're going to do our checks and balances and
we're going to be with honest customers.

Speaker 1 (06:55):
Okay, what about the whole I mean, we've all gone
and looked for a house and thought fantastic. You've go
on to an auction and it's way above all. Right,
let's use hometowns here. You want to buy an Orange,
but you might find yourself buying in Wellington. Listeners may
not know. And it's from Wellington. I'm from Orange, their
neighboring city, so we won't get into an argument about that.
But what if you do want to buy an Orange
and you're priced out because all of a sudden, tourism

(07:17):
is big in that area. Everything's really expensive. Do you
give up?

Speaker 2 (07:21):
Definitely not, you know, and I guess you know there's
so much heart, you know, if you're buying it as
an owner, occupy your home there's a motion in it,
so don't give up. And that's that's the message. So
what do you do your cast the net wider? Wellington's
a great place, but there's also other great regional towns
specifically that example, and we encourage people to look at
you know, real estate dot com, DoD au, domain dot com,

(07:42):
DoD au, start looking at other suburbs or towns, regional
towns and find find something that's that is going to
be in budget. You can you can ask your lender
for historical sales reports in these other areas in suburbs
and you can start to get a sense of actually
how can I do this? And you know you often

(08:02):
hear about rent vesting as well, and that's a that's
a really good option as well for Australians. So you
know that the expression you rent where you want to live,
and you buy where you think it's going to go up,
but you probably wouldn't want to.

Speaker 3 (08:16):
Live there now.

Speaker 2 (08:17):
Yeah, And so then you know you're going to have
some tenants in there that are helping pay down that
loan while the equity builds and then in time you
can you know, your portfolio grows. So we don't want
young Australians to give up, you know. That's that's the
that's the real message. And young Australians know our first
home buyer now I think the recent data said they're

(08:39):
thirty six, you know, so at thirty six year old
is the average first home buyer in Australia.

Speaker 3 (08:44):
So all of them I thought way way older. So yeah, there's.

Speaker 1 (08:48):
Also lots of other stuff. Stamp duty. If you get
with the U Bank ten percent, you're not getting the
LM the lender's mortgage insurance, but you know others may
have to take out that. Then stuff like home contents insurance.
You know I always walk into a place and then
remodel it fantastic, who knows, and then twelve months in
you think how am I going to actually afford any

(09:08):
of them? So it's all that stuff like how do
you get your head around that stuff?

Speaker 2 (09:12):
So I mean exactly right on all of that. How
do you get your head around that stuff? Don't forget
the property reports, the pest inspection reports, building inspections.

Speaker 3 (09:22):
All of these fees, you know, they vendor fees.

Speaker 2 (09:26):
They all add up right, so you know you might
add five to ten percent that you might have to
save for as well, so because that's outside of your
deposit really important. And not to forget that, but the
lenders have really great calculators and tools and all their
websites to help you work through all of that. So
it's being prepared, it's being across your money, your savings,

(09:47):
you know, like it's there's so many tools there to
help help customers. But build a relationship with a lender
and they'll look after you.

Speaker 1 (09:55):
There's also these I mean you don't realize it until
you get a home and then you upside, then you
have kids and stuff. There are enormous long term benefits
in actually owning a home and not renting. And I'm
not sort of being disparaging for those who are renting.
I mean, good on them, like each to their own.
But for me personally actually owning a home and I've

(10:15):
probably got my first one in my late twenties or
something or other, I have never regretted it.

Speaker 2 (10:20):
Yeah, I mean, you look at property value of property
in Australia, it's it's you know, it's been a pretty
sure thing, hasn't it. So I mean it's a great
way to diversify, you know, your portfolio. If you have property,
maybe some shares. I think I think that helps you
can build your well through then you know, getting an
investment property. I think, you know, it's my opinion general advice,

(10:44):
you know, I think I think property is a really
great thing and it's not out of reach.

Speaker 3 (10:48):
It's not out of reach for young Australian.

Speaker 1 (10:51):
So any thanks for talking to Fear and Greed Q
and A.

Speaker 3 (10:53):
Thanks for having me.

Speaker 1 (10:54):
That was Nie Harrison, head of direct Lending at ubet,
which is a great supporter of this podcast. If you've
got something you'd like to know, then send through your
question on LinkedIn, Instagram, Facebook or at Fearing Greed dot
com dot au. I'm sure and I all that this
is Fear Greed at Q and A