The Property Investor Playbook
Welcome to The Property Investor Playbook, your ultimate guide to building wealth through property investment. Hosted by Daniel Chadrawy and Lara Osborn, this podcast offers step-by-step insights into growing your financial portfolio through real estate.
Join us as we bring you in-depth interviews with industry experts, successful investors, and everyday Australians on their journey to financial freedom. Learn from those who have successfully navigated the path to prosperity and gain invaluable tips to kickstart your own investment journey.
Tune in to discover the strategies, tips, and secrets to creating long-term wealth through property investments, only on The Property Investor Playbook.
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The Property Investor Playbook
Decoding the Refinancing Puzzle: Strategies for a Wealthier Tomorrow - The Property Investor Playbook
Get ready to unravel the complexities of refinancing as we welcome Jeffrey Eskaff from Liviti Finance, a true expert in the field. Have you ever wondered why refinancing is becoming a hot topic, especially with interest rates on the rise? We promise you'll walk away from this episode with actionable strategies to secure lower interest rates or extract equity for personal financial goals. Jeffrey shares his personal property investment journey, including the lessons learned and regrets he has about not acting sooner. This discussion is designed to equip you with the knowledge to manage your property portfolio strategically.
Join us as we explore the critical role of mortgage brokers in refinancing, the advantages of offset accounts, and the nuances of property settlements. We’ll dive into real-world examples showing the importance of responsiveness and choosing the right lender to meet tight deadlines.
Jeffrey sheds light on the differences between redraw and offset accounts and how they can serve different financial strategies. With insights into how banks are adjusting interest rates and the significance of understanding personal financial goals, this episode is packed with wisdom to help you maximise your refinancing opportunities and build lasting wealth.
Welcome to the Property Investor Playbook. I'm Lara.
Speaker 2:And I'm Daniel. We're going to show you, step-by-step, how you can grow your wealth.
Speaker 1:Hi guys, this is our last episode of season one. We have had a great season so far with Daniel and I and even Nat hosting as well. We've had so many amazing guests from developers to finance experts and so many more. We're really looking forward to season two that we will be launching early next year in January. So stay tuned for that.
Speaker 1:But today's episode I had Jeffrey Eska from Liberty Finance on. We've had so many questions coming in from the team on our socials people emailing as well, asking about refinancing. With interest rates quite high at the moment, a lot of people are just not sure what to do, what the steps are that they need to take, and just want a little bit of guidance before they reach out to a mortgage broker. So that's why I thought I would have Jeffrey on today and discuss refinancing. I did have a look at a few stats before we came on, just around refinancing from PECSA and it's a 2022 data, so it's probably a little different now, but more than 1 million Australians refinanced their home loan over the past 12 months, so that was in 2022. And they saved an estimated $1,524 on average In 2024.
Speaker 1:Actually, the rising interest rates encouraged more Aussies to refinance their existing loan, with refinance loans reaching a total value of $220 billion, which is up 11.4% from last year, and nationally, over 452,000 refinances were completed in 2023, which is up 10.7% on the year before that. So a lot of people are refinancing. People are feeling the pain of, you know, the cost of living and interest rates going up, of the cost of living and interest rates going up. So let's jump in. We'll chat with Jeff and we'll hear his take on refinancing and what he thinks is going to happen with interest rates this year. Hi, jeff.
Speaker 2:Hey Lara, how are you Good, how are you?
Speaker 1:Good Thanks for coming on.
Speaker 2:Thanks for having me.
Speaker 1:I've been trying to have you on for a little while now.
Speaker 2:I'm a busy guy.
Speaker 1:You're dodging me no.
Speaker 2:I'm not Just quite busy.
Speaker 1:You're busy with all of your finance deals and helping all of our customers.
Speaker 2:Yeah, 100% Nice. A lot of settlements.
Speaker 1:Yes, All right, well, I think we might jump into. We always do a fast five, a few quick questions. Usually we do 30 seconds or so to go through them. I'm not going to time you today because I don't have my trusty sidekick um.
Speaker 2:What's your name and age? My name is Jeffrey Eska and I'm 30 years old?
Speaker 1:how many properties do you own? One what's your biggest property regret? Not buying more at a young age what's one thing about yourself you've never told anyone? Oh this one stumps everybody.
Speaker 2:I ate like seven times a day interesting.
Speaker 1:Okay, what's your most embarrassing moment?
Speaker 2:it's another good one. I think I fell off a bike in front of a whole bunch of people when I was a kid.
Speaker 1:Interesting. You eat seven times a day.
Speaker 2:Yes.
Speaker 1:Wow yeah, snacks or meals, or Snacks or meals.
Speaker 2:I have breakfast. I have two meals out of the day. I have one meal when I go home have dinner. So I'll have one after gym and one before bed.
Speaker 1:Wow. Yeah, how do you fit that in? Are you just constantly eating all day? Yeah, wow, I think Daniel is similar, right, doesn't he eat like every two hours on the dot?
Speaker 2:or one hour or something. Yeah, I think it's every three hours.
Speaker 1:I'm like every two hours. I don't know how you do that. I skip breakfast most mornings. No, get upset if I skip breakfast. That's Saturday, right? Yeah, what age did you buy your first property? You said you regret not buying more earlier.
Speaker 2:I was 22 when I bought my first one mm-hmm.
Speaker 1:Where did you buy?
Speaker 2:tell us a bit about it out in Elderslie, near Camden, the red area yeah it was a home of them package bought it for about 680 000. Nice, now it's worth. I've added a few months ago for 1.15, so I was going to apply to be in equity nice so I just wish I bought some more over the years?
Speaker 1:yeah, do that again. Do you plan on taking some equity out of it to buy?
Speaker 2:yeah, I'm currently in the process of releasing equity to buy a few more properties nice to buy a few more yeah, very Nice to buy a few more.
Speaker 1:Yeah, very nice Going through Liberty to get an investment strategy or doing it yourself.
Speaker 2:I'll go to Daniel.
Speaker 1:Yeah, I'm sure he'll help you. Yeah of course, All right. The main reason we're on today, I guess, is to go through refinancing. It's been a hot topic around the office and I'm sure you've got a lot of clients at the moment going through refinancing. First, can you tell us what is refinancing?
Speaker 2:Well, the basis of it is just you're moving from one lender to another yeah, you'll learn my CBA and you say, hey, I want to refinance, go to NAB, might want a lower rate, might take out some equity, or there's other reasons you can refinance. Yeah, but the main reason is just moving from one lender to another lender.
Speaker 1:Okay, awesome, okay, awesome. Why would somebody refinance? Are there multiple reasons?
Speaker 2:Yeah. So first reason is you might just want a lower rate. You might be paying too high. You want to take out some equity to either go on a vacation, pay off some personal debt, purchase some renovation around the house, take out some equity to buy a new property or just have some equity sit in your bank account.
Speaker 1:Okay, what do you think is the most common one? What do people?
Speaker 2:The one that I'm seeing a lot lately is a lot of people taking out equity to buy investment properties.
Speaker 1:Okay, that's good, that's good. I actually pulled some data from PEXA, which is Australians who refinance their mortgage to a new lender save an estimated $1,908 per year on average. Hundred and eight dollars per year on average, um compared to an estimated average saving of 384 dollars per annum for homeowners that refinance with their existing lender? Yeah, correct. Do you see that, like very often that people are, you know they want to stick to the same bank and refinance, or are people becoming more?
Speaker 2:no, not as much as not as much as they used to be. So the old, traditional, like old school people like all stick to the same bank, bank lawyers who they look after you. That doesn't exist anymore. Yeah. Like you say, for example, you're with CBA, they might offer you 6.09%. Yeah. I can take another bank and give you 5.98%, and that's where your extra savings gonna come from.
Speaker 1:Yeah. Do you think that interest rates have played a part in people being happy to jump banks because they want the money saving rather than the loyalty?
Speaker 2:Yeah, of course.
Speaker 1:Yeah, have you got a client story that Did something similar recently?
Speaker 2:Yes, I had one. He has three loans, so he had one with Liberty, one with CBA and one with ME Bank. Yeah, so CBA just came off the fixed period and his rate was 7.21%. That's high, yes, the rate with Liberty was 6.94% and the rate with ME was 6.74%. Yeah. I was able to get all of them below 6.5%.
Speaker 1:Wow, that's really good.
Speaker 2:So he had really good.
Speaker 1:So yeah, daniel, save about 11,000 altogether well, yeah, that's amazing yeah, last week yeah, there would be a lot of people kind of in a similar boat and not really realizing how much they could be saving yeah, if they refined anything too much about it yeah, that's the thing did you consolidate them to one bank?
Speaker 2:yes, they all went to the same bank. Yeah, just still three standalone loans okay, interesting.
Speaker 1:Um, you obviously talked about equity in your own property. You're going to hopefully take out some equity to buy a few investment properties. Can you just, I guess, remind everybody what is equity and what is the difference between equity and usable equity?
Speaker 2:Okay, so equity is basically the difference between the loan you have against the value of the property. Let's just say your value of the property is worth $. Just say your value, the property is worth one million and you loan seven hundred thousand, you have three hundred thousand of equity. Yeah, actual accessible equity. The banks will assess that at eighty percent of the value of your property. It's the same scenario million dollar property, seven hundred thousand dollar loan.
Speaker 2:Yeah, at eighty percent you can borrow eight hundred thousand so you have a hundred thousand of usable equity okay and that's what you can use to buy your next property.
Speaker 1:Okay, interesting. I feel like I've heard that description slightly different from a few people. So you said it's 80% of the value of the property and then the leftover. Some other people explain it. I'm sure it works out the same the other way around it's 80% of your equity.
Speaker 2:No, so it's 80% of the actual value of the property. So if your property's worth one million, and your loan's 500,000, so 80% of one million is 800,000, so you have 300,000 of excess equity.
Speaker 1:Got it cool, no worries. What would stop somebody from being able to refinance? So if, let's say, I was that guy who had a loan at interest rate of seven point something, what would stop me from being able to be able to refinance?
Speaker 2:well, some people in these market conditions now they can't actually service a loan. So you might have bought something two years ago. You can service them and rates a bit lower, yeah, but with today's rates and market conditions they might not actually be able to service what do you mean by service the loan? They might not be able to get approved in the eyes of the bank to actually fund that service for the loan.
Speaker 1:And make the repayments. Yeah, okay, any other reasons that might stop them from being able to refinance?
Speaker 2:That's the main one. Some people might just accumulate all their bad payments, like bad history, in the last 6 to 12 months that they have to fix it up or just go to another second 30 lender which the rates might be similar to what they're paying now. So if that's the case, we just get them to wait another six months just to clean up the credit.
Speaker 1:Okay, so I guess, since they last financed the property, anything that's happened since then that's changed, whether it be income or credit scores, late payments, anything, all of that will impact. Yeah, okay, cool. How do we begin the process of refinancing? What's the first step?
Speaker 2:First of all we have to talk to a bank or broker. But obviously you go to a broker. They're more reliable, they have access to over 50 lenders. They get you the best options.
Speaker 1:From everything Okay, and what's the process involved once we reach out to a broker?
Speaker 2:So let's just say you come to me say you want to refinance your home loan. I'll send you the email of the documents I need from you. So your payslips, bank statements, your income statements, anything else that we need for the loan. Yeah, then, from then I will do your calculations, see which lenders you can service with, and from there I'll find out which one offers you the best rate.
Speaker 2:Okay and then and then from then we just lodge the application to the bank. Yeah, can take three to four weeks, just depending on lender turnaround times plus your current lender and the discharge time. So some banks will take up to 30 days to discharge your loan. Okay, so I might submit you tomorrow and have you approved by Monday. Yeah. But the bank might take 30 days to discharge your loan, so I can't settle until your current bank's ready to let go of the loan.
Speaker 1:Okay, how would that impact if I was buying another property?
Speaker 2:If you're buying another property, then in that instance we're not looking for the best rate out there, we're looking for, obviously, the most fastest solution. Yeah. And then from that side, we can push your current bank to speed up the process of the discharge.
Speaker 1:Okay, all right, interesting. Could you, I guess, give us some examples of different things? Maybe people don't understand when refinancing like break fees, fixed rate, period, ending um you know, does it roll over? Is it expensive, any of those things?
Speaker 2:so it's not expensive. So if you get to a broker, don't charge any fee. You pay the commission from the bank yeah and because the break fees a lot of banks. They do have a break fee with ranges between 195. Some banks even charge $1000, just depends who you're with.
Speaker 1:That's a big difference. Is it usually the big four that charge more?
Speaker 2:No, the big four charge less. So second to 30 lenders that charge will be higher. Okay, but that fee gets included into the loan on settlement, so you don't have to actually pay out of pocket. Now, when your fixed rate is ending, some banks will call that to the client two months before it does end and say we're going to offer you X for your rate. Yeah. Some banks don't even do it. And then that's when, like that client, I refinanced. His fixed rate reverted to 7.21.
Speaker 1:And he didn't realize. Yes, that happened to me actually last year, I think it was. But yeah, I got a letter to say this is the rate that you'll move on to. And then I reached out to Nat actually and said can you help me?
Speaker 2:I had a client. Actually a few weeks ago I refinanced him because his fixed period was ending.
Speaker 1:Yeah.
Speaker 2:And then Westpac reached out to him after we settled.
Speaker 1:Interesting. Yeah, they said your fixed period is ending this week and he'd already settled on a new loan. Yeah, a bit delayed yeah, yeah, is that common as well?
Speaker 2:not really okay. I don't know what happened with them. Interesting glitch in the system um, what else around?
Speaker 1:I guess the fees involved. So you know, if they're refinancing do they have to pay lmi again if the if their lvr is?
Speaker 2:yes, if their l, their LVR is above 80% then, they do have to pay lenders more insurance. But the benefit of going to a broker is that we do valuations with multiple lenders and obviously we'll go to one who gives us the higher valuation. To avoid paying the LMI fee, banks would pay for the valuation up front, so it's a fee the client doesn't have to pay. The only fee they might have to pay is an establishment fee to that new bank they're going to.
Speaker 1:Does that get added onto the loan as well?
Speaker 2:Yeah correct.
Speaker 1:Okay, so there's not many out-of-pocket fees then.
Speaker 2:No, not really.
Speaker 1:Because LMI can get added to the loan as well right. If they do have to pay it. Yeah, Okay, awesome, Okay, cool. Do you have any clients? I guess that had fixed rates. Ending that fixed rate cliff that everybody talked about. That was sometime last year where everybody was coming off, you know, 2% interest rates and jumping all the way up to 6% to 7%.
Speaker 2:Yeah.
Speaker 1:Did you have many clients struggle going through that period or were you able to kind of help them and get them?
Speaker 2:a better rate going through that period, or were you able to kind of help them and get them a? I did have a lot of struggling with servicing because obviously two percent versus six percent is a big difference in your payments. But banks have released a new policy where they refinance you on like a one percent buffer instead of three percent yeah that's helped a lot of clients with servicing so they can still service them.
Speaker 2:Just have to think outside the box for the solution. I still have a few clients that have fixed that 1.98% that's coming off in January, February.
Speaker 1:I'm very jealous that they must have fixed for like three years, four years, four years yeah.
Speaker 2:So they're getting nervous because they have like 1.2 million loans. Wow, it's going to be a big jump.
Speaker 1:That is Do you think that they will struggle to refinance? Do you think they'd be almost better off just staying where they are for a little bit, or If they can't refinance, do? You think?
Speaker 2:they'd be almost better off just staying where they are for a little bit. Or if they can't refinance or they can't actually service it, worst case we'll just get repricing with the current lender. Yeah, but what I've done to most of my clients is I've actually reached out to them six months prior to say look, start building up your savings to the offset account. So one of my clients, his fixed one, ends in january next year yeah in the last two years he's put 150k into the offset account.
Speaker 2:So once the fixed rate ends, we're going to make him have an offset account if he can't service, and the offset will negate some of the interest payments.
Speaker 1:Okay, I'm not familiar massively with offset accounts, but can you walk us through how an offset account works and how it benefits?
Speaker 2:Yep. So let's just say $100,000 loan, for example. So your loan's $100,000 and you've got $10,000 in your offset account. Yeah, so the bank deducts that $10,000 from the $100,000 and they charge you interest based on $90,000. Okay. So some clients who are more seasoned investors down the track, like 50, 60 years old, they have $400,000 in the offset account and they have $400,000 on the home loan.
Speaker 1:So they're not actually paying.
Speaker 2:They're not paying any interest.
Speaker 1:Okay, okay, that's good, yeah, interesting, and can you explain, I guess, in a bit more detail, how that would help a client that you're trying to refinance? The one you mentioned comes off their fixed rate in January.
Speaker 2:Yeah. So that's why I'm saying if he can't actually refinance it, he has $150,000 to actually help him lower his interest repayments.
Speaker 1:Okay, so the interest rate won't affect him too much.
Speaker 2:Yeah.
Speaker 1:Okay, all right, that makes sense. Awesome, um, do you have a client win of this week that you settled that you want to share with everybody?
Speaker 2:uh, yeah, I had a client call me sunday night. He was in a distress because he had to settle on a property yesterday actually, so he went to macquarie, submitted monday, got the approval settled this afternoon at 4 30 exciting yeah, he was very stressed.
Speaker 1:I can imagine. How do you help calm your clients down in that like stressful part of the process.
Speaker 2:It's just communication, so I answered his phone call at 7 30 pm on sunday so it was the first point for him. Yeah, then throughout the whole process, monday through to yes afternoon, I'll just contact him the whole time he said this is what's happening. This, this is what's happening.
Speaker 1:Constant updates, yeah, so.
Speaker 2:Sunday night I actually sent him the email, what I need. By Monday morning I had everything, so before 10 am we submitted the whole loan.
Speaker 1:Okay, that's quick then. Yeah, are you and your team mostly responsive? Over the weekends too, if needed, if you've got especially tight deadlines? So I'm always glued to my phone. Yeah, that's why you're dodging coming here. Yeah, I think it was last week you were on the phone constantly all day, different phone calls when I was trying to grab you.
Speaker 2:Yeah, I think last Thursday I tracked my steps. They're about 18,000 steps and this is the car park.
Speaker 1:Just pacing back and forth on the phone, yeah. Back to your computer to grab something back out again.
Speaker 2:Yeah, it doesn't stop.
Speaker 1:Yeah, back out again. Yeah, it doesn't stop. Yeah, um, what would your um biggest piece of advice, or top three bits of advice be for people looking?
Speaker 2:to refinance at the moment. Uh, seek a mortgage broker, not a bank. Yeah, we have better options for your time.
Speaker 1:The lowest rates are not always going to be the best option for you yeah and refinancing to a 30 year loan term might not be the best solution for everyone actually, I was looking at a few videos on this the other day, because there's a few um people I follow on social media. Obviously we shouldn't trust everything on social media. Um, and it was, yeah, somebody talking about refinancing and that when you refinance, most people don't realize that they're signing up for another 30 year loan. Um, what's your advice there? Is it different for every person, or should you be trying to keep the loan term similar to what you're already at?
Speaker 2:it is case by case, depending on their goals, what, they actually need, but yeah more than likely. I'll refinance them to what the current term is yeah unless I need that extra bit of servicing. Or they're taking out equity for a new purchase and you need that extra bit of servicing, yeah, then that's when I'll go up to a 30-year term. But if you come to me say I have 23 years left on my loan term, I will refinance you 23 years okay, yeah, and you don't want to extend it, right?
Speaker 2:no one wants to pay a mortgage longer than yeah, of course if I have the worst case scenario, I do extend it to a 30-year term. Yeah, I'll say look, this is what your payments will look like if your loan was still 25 years yeah make those additional payments each month. If you find one month that you are struggling with your payments, just draw back the extra payment.
Speaker 1:Yes, kept in a kiddie fund yeah and any additional payments you do make will see in your redraw account so you can access it whenever you want mm-hmm, can you explain how a redraw account works and how it's different from an offset account?
Speaker 2:yes, so redraw account you have to have it set up on settlement and then basically, um, so offset account you have the 10k sitting in your savings account, yeah, which is actually count, but in a redraw account you're actually paying 10 000 to the loan itself yeah so on your bank statement you'll see um account balance and then available balance will be 10 000, for example.
Speaker 1:So anytime you can take out that ten thousand dollars yeah, okay, so that's people making extra repayments really onto their? Yeah, okay, interesting. Is there bigger benefits, do you think for one versus the other?
Speaker 2:Just depends on personal preference and everyone's goals.
Speaker 1:Okay, and what type of goal do you think someone would have if they're going a redraw versus an offset?
Speaker 2:Some people don't wanna pay the extra fee that comes with an offset account, so some banks might charge you $8 a month or $10 a month to have that account set up. Where a redraw just comes with the loan. Okay, yeah, you don't pay extra. Yeah, you just have to speak to your bank to actually make sure it's set up properly.
Speaker 1:Okay, yeah, I actually didn't even know that I had a redraw account set up on my loan until I got a letter to say that our repayments were changing monthly like their minimum repayment. But we kept it at the higher repayment and then it all of a sudden was just going into the yeah, so those extra repayments were just going to your redraw.
Speaker 2:It's like accumulating every month. Yeah, yeah.
Speaker 1:That's probably something not many people are aware of, or whether they have it, because I definitely didn't know that.
Speaker 2:Yeah, or some people think they haven't. They haven't actually spoken to the bank to set it up correctly haven't actually spoken to the bank to set it up correctly. Yeah, okay what happens then?
Speaker 1:if they try to make extra repayments, then the actual principal balance gets reduced and the available amount won't be there okay so you've actually lost, so it'll still come off their loan, but they won't be able to access it should they need to okay yeah, interesting. Speaking of interest rates, what do you think is going to happen? There's a lot of talk at the moment. Yeah, um, a few of the big four have changed their or lowered their fixed rates for I think I saw one or two years.
Speaker 2:Yeah, even three and four years.
Speaker 1:Yeah, I think some of them have come down. What do you think is going to happen and what are you seeing at the moment?
Speaker 2:Based on history. Every time the bank reduces their fixed rates lower than the variable rates, it means they're preparing for anticipation for the RBA to actually reduce the rate. Yeah, lower than the variable rates, it means they're preparing for anticipation for rba to actually reduce the rate, yeah. So right now you can get a variable rate about low sixes, even high fives yeah and get a fixed rate about 5.5, which means that they're anticipating that in the next 20 months the rate will be reduced yeah, it's just a matter of time yeah when that will happen yeah, definitely.
Speaker 1:I've had a few conversations with different people over the last few weeks and you know the us federal Reserve dropped theirs by half a percent. New Zealand followed again a few weeks ago as well. Yeah, I definitely agree. It's only a matter of time. I don't think it's going to happen in November. I think it'll happen early next year.
Speaker 2:But we never know.
Speaker 1:We never know, we can only hope. I mean, I hope it drops in November, but we'll see what happens.
Speaker 2:Yeah, me too.
Speaker 1:Yeah, any other advice that you want to share with our listeners before we head off?
Speaker 2:I think the main thing is just, instead of doing your research, spending all your time and effort into it, just go straight to a mortgage broker. Save yourself from going to a bank. They won't always have the best offering for you. Yeah. And then, yeah, best offering for you, yeah, and then, yeah, just use a mortgage broker. Awesome, all right, thanks, jeff. Thanks for coming on. All right, thanks, laura. Thanks for having me. Thank you.
