Guest Podcast 2: Perry Matt – Top Tips Banks Don’t Want You to Know with Victor Lagos

Guest Podcast 2: Perry Matt – Top Tips Banks Don’t Want You to Know with Victor Lagos

In this episode of Perry Matt’s podcast, we are joined by special guest Victor Lagos, founder of Lagos Financial and an experienced mortgage broker with over 15 years in finance and 7 years in mortgage brokering. Victor shares invaluable insights on the differences between banks and mortgage brokers, explaining how brokers can offer more tailored and beneficial options for borrowers.

We dive into various topics, including understanding borrowing capacity, the impact of credit scores, the benefits of using a broker, and tips on managing expenses to maximise borrowing potential. Victor also sheds light on the implications of having a HECS debt, the importance of genuine savings, and how getting financial help from parents can affect your mortgage.

Whether you’re a first-time home buyer or looking to optimise your borrowing capacity, this episode is packed with expert advice you won’t want to miss.

0:00 what's up you guys today we're gonna go through the top tips that banks don't want you to know 0:25 today the special guest we have a victor like with victor how you doing man hey hey good to see you 0:30 man good to see you man thank you for making time for me man you're a busy man especially in these 0:34 times okay so victor he's been in finance for uh since 15 years wow that's a long time you look 0:43 very young wow you're born in the bank there you go and you've been a mortgage broker since 0:49 uh seven years is that correct yeah that's right wow and you do commercial and the residential 0:56 yeah that must be pretty complicated oh they're very different yeah i know i mean easy for you 1:02 but yeah complicated for me okay so victor thank you very much for your time i happy to be here so Difference between a mortgage broker and a bank 1:07 i do get a lot of people that ask me i want to buy a house and i want to go to the bank 1:15 or should i go to the mortgage broker and through my experience mortgage brokers are able to get you 1:22 more money so what's the difference between a mortgage broker and a bank okay 1:29 the main difference is a bank can only offer you products that that bank offers yes so 1:35 they're limited to that bank policy and how much that bank can lend you they don't have 1:39 access to other lenders to compare right whereas a mortgage broker can look at different options 1:45 yeah based on your circumstances yeah and work out who's going to lend you the most money 1:50 who you're eligible for yeah and what's the best interest rate you can get in lower space he's 1:54 like it's like if you go to the toyota dealer and you're just gonna buy a toyota cars if you go to a 2:03 dealer that's got everything you can just have much more options exactly right okay i would Different policies from different lenders 2:09 say would you say this is more tailored for the person needs yeah so when you 2:14 know multiple banks policies yeah and someone is in a situation that it's not so black and 2:20 white yes then you need to know different policies from different lenders different banks yes to know 2:26 where that customer fits so first and foremost where are they going to get the funds from yes 2:30 because you don't want to apply for finance with the chance that you're going to get declined got 2:36 it a broker can do an assessment and say are you eligible yes okay now we put forward the 2:43 application yeah but if you go directly to the bank yeah they will do an application 2:48 and then tell you after whether you're eligible so then you would already have a decline 2:53 and that might affect your credit score and then you don't have to go to a next bank and apply 2:58 does that make sense yes it does wow okay so oh that's interesting okay so and you guys don't Do brokers charge fees 3:06 charge i mean you don't get paid by the clients most of the time is that right so some brokers do 3:11 charge a mandate yeah and it depends on the level of work it depends on a level experience and also 3:18 the business that that broker might have yes so with myself and the business i work with 3:23 us finance we don't charge customers a fee yes our revenue our income comes purely from the 3:28 commission that lenders pay us to introduce them business because they're not paying for marketing 3:34 and they're not paying for all the loan packaging uh or the documentation to be presented to them 3:39 right they don't have to pay someone for that yeah so they pay us a commission to introduce the 3:43 business it doesn't cost the customer anything nothing but the good thing is the customers 3:47 a lot of the time will end up getting a better interest rate through us than that they will get 3:52 directly yeah and then of course we get the commission so it doesn't impact their rate 3:56 yeah and so it's a win-win scenario yeah right okay thanks for that so let's say i am um the How much can I borrow 4:02 first home buyer okay and i'm a young guy 30 years old thank you hey i've got a girlfriend 4:09 i've got a bit of credit cards i've got a little bit of car loan so the thing first thing i do want 4:15 to know is how much i can borrow and how much i can get for a you know a deposit yeah so how 4:22 do you work it around like in my case yeah so first and foremost you need to understand what 4:30 your borrowing capacity is right now yes and then what it can be depending if that's your limitation 4:36 so i want to understand what your income levels are yeah both of you and what your expenses are 4:42 yeah so you know your day-to-day costs your bills yeah and then of course your financial commitments 4:48 like you mentioned car loan credit cards yes so if those cards are maxed out then the first thing you 4:56 want to do is pay those down first so if i got a credit card and i've got eight thousand dollars 5:01 to my american express petty role act yeah you because at the same time you're wanting to save 5:08 funds for a deposit right yes but if you've got debt owing right that's actually impacting your 5:12 borrowing capacity got it so what but if you just carry a card yeah and you clear the balance every 5:18 month because you're getting points you have a reward system but the bank gave you a high 5:22 credit card limit yes you'd want to reduce that to as low as possible so for example you have 5:27 an eight grand credit card you might be able to drop that to say two or three grand right okay and 5:32 that will help you with the borrowing capacity okay what about if you meet people sometimes i Positive credit reporting 5:37 spoke with someone they never had a credit card they never but they now want to buy a house yeah 5:44 what what's your tip what's your advice to get a little bit of a credit availability to show to the 5:52 different lenders that you can borrow more yeah so look um there's a thing called positive credit 5:57 reporting or in australia we call it comprehensive credit reporting and that only really kicked off 6:03 about 18 months ago to two years and what that means is that the higher your score the better 6:10 your chances are of getting finance or credit so typically i would look at and say about 600 6:16 and above it's a good score yeah anything below that it's usually because you've had something 6:21 negative on your file but if you're new and you've never borrowed anything ever then you need to 6:26 create a credit file in the first place so if you approach a bank and you're applying for finance 6:31 and you've never had a credit file that's a red flag to the bank depending on your age of course 6:36 if you're 18 or 20 years old yeah it's expected but if you're 30 yeah and you've never had any 6:42 debt and no credit the bank's gonna say why so get an electricity bill some sort of utility 6:48 that will create a credit file and as long as you make your payments on time you'll have a positive 6:54 score the older the file so the longer you've had a credit file and you've never had any negative 6:59 or late payments on anything the higher your score will be so yes so let's say from a basic point of Can you get a credit card 7:05 view electricity bill yeah number one and not everybody can get a credit card is that correct 7:13 look if you're if you're earning an income yes and it's steady yeah and you've got a decent credit 7:18 score yes then credit cards are pretty easy to get approved okay as long as there's a surplus 7:23 in uh meaning you have extra funds to afford a credit card yeah after your rent or or 7:28 you know your outgoing expenses then yeah credit card can be approved if i have a kid Should I give my kids a credit card 7:34 and i want them to have a good future yeah do you think it's good idea to get them a credit card 7:41 no why no so credit cards um the way i look at them from a couple of perspectives is 7:47 firstly from a borrowing for for a house yeah it's a negative because even if you don't use the card 7:53 the bank will look at the limit at the potential of what you want to use it for so if you've got 7:58 a five thousand dollar credit card but you never use it yeah the bank will assume that you can use 8:02 up to five grand got it and then that will impact your borrowing secondly it reinforces the idea of 8:11 spending money that you don't have so when you're buying a house and you're wanting to teach your 8:17 kids about you know building a property portfolio yes you want to start the habits 8:21 young and the habits are putting money away for future benefit so that is 8:26 saving right it's delayed gratification yes um so that means that if you give them a credit card 8:33 and they want to buy something right now they don't have to save for it yes so you're already 8:38 putting them on the back foot they buy it and then they have to pay it back later so it's a 8:43 it's a negative pattern because it is you can't go to a bank to buy a house and say can i have 8:47 the funds yeah i don't have a deposit but i'll pay it back later yeah no you need to save up 8:52 front and the banks have what's called genuine savings they want to see a pattern that you can 8:58 put money away consistently for the future and that's how they they lend money to you 9:04 when is a healthy age to get a credit card to actually build some credit score well technically 9:09 you can get a credit card from 18 onwards um so if you're working at that point yeah and you just 9:15 want a card to get a credit score yeah then you get one at a low limit and then you just clear 9:20 the balance every month so say it was a two grand limit yeah um and you use that for your day-to-day 9:26 expenses got it and bills when you get paid clear the balance right and that will help you score 9:32 but i wouldn't advise to get um higher than that from the backstage as a mortgage broker how do you How do I calculate my borrowing capacity 9:40 guys roughly calculate how much i can borrow and how much i need for a deposit just to give some 9:48 some numbers i know i don't want to get complicated because i know there is a lot 9:51 of work probably yeah behind just to give a basic foundation how do you calculate 9:57 okay so it isn't a simple calculation but there is a simple way to calculate it to give you 10:04 um an estimate yeah so the first thing you want to look at is your after tax income 10:12 so how much you actually left with after you paid tax right yeah and then you want to look at your 10:18 actual monthly expenses so at the end of the month how much have you actually spent so if you look 10:24 say over a three month period yes and average that out you'll figure out okay deduct rent 10:30 and your bills your groceries and you're going out how much does it actually end up being yeah 10:35 and then that will leave a surplus does that make sense yes the difference between what you earn 10:39 and what you spend you spend here that's that's the money that you have available for borrowing 10:44 right so now the next step is understanding how much are the repayments that you can afford based 10:52 on that leftover funds and that would be keep in mind that if you're renting you can remove rent 10:58 because that's not going to continue when you buy a house to live in right yes so you can add that 11:02 to your income that's a good point yeah there you go i do know that so the banks use what's called 11:08 an assessment rate um or a floor rate and that is around five and a half percent thereabouts that's 11:17 the minimum interest rate so at the moment you can borrow money for say two and a half percent 11:27 there is a two and a half percent buffer on top of that interest rate that banks use in order 11:33 to work out your borrowing capacity yeah so what you do is you work out how much your repayments 11:39 at not two and a half percent but at five percent yeah does that make sense yes so then some 11:45 following so then you use a calculator a principal and interest repayment calculator put five percent 11:51 as the interest rate and you put the loan amount so if you wanted to buy a house for 11:55 say a million dollars and you wanted to you know you had 10 deposit plus stamp duty then 12:01 you would borrow 900 000. so then you want to see 900 000 at 5 over 30 years so if your income 12:09 your surplus can cover the repayments on that then it's probably likely that you can borrow 12:13 your funds so purposely you gotta do five percent just to give a little bit of a buffer buffer the 12:20 banks do that because interest rates histo are iron historic low right now but they are going 12:26 to increase at some point or another so they want to make sure that you can afford the repayments 12:30 when the rates go up okay now i've received the question from will thank you will uh shares Does trading affect my borrowing capacity 12:37 let's say i own a portfolio of stocks and shares yeah and i like to get in and get out on stocks 12:48 does this affect my borrowing capacity like i they tried yeah i buy tesla and i get out 12:56 i bought some bitcoin i get out so does this affect my borrowing capacity it's a good question 13:05 and it's a tricky one because it depends on how good an investor you are yes because if you're 13:10 losing money yeah then it's treated as an expense yeah but if it's not going down in value yeah and 13:17 at least not going down of course if it goes up it means you're a really good investor yeah but as 13:21 long as you're not losing money then it's treated as savings yeah right because you're using money 13:27 yeah for future benefit right you're not spending that money you're in exchange you're investing and 13:32 it should grow in value yeah but if you're trading and then and you track that and say oh i've 13:37 actually lost 10 grand this month and then you've lost 10 grand consistently yeah for the last six 13:42 months well it's not really an investment right yeah it's an expense it is that makes sense yes 13:47 so of course perfect okay yeah make sure you you invest well okay so nice thanks for that is there How to maximize my borrowing capacity 13:57 any other tips that i can have before i approach you to actually maximize my borrowing capacity 14:05 a part of you know have some good credit scores and look after my expenses yeah so 14:14 expenses is an interesting one because that 14:17 the two things sorry there's a few things that are going to impact your borrowing capacity 14:22 yes one number one is how much you earn yes right and the number two is how much you spend 14:29 um so let's start with how much you earn yes okay so if you're an employee and your income 14:37 is a set amount then there's not much you can do yes but if you're getting bonuses or commissions 14:43 then it's important to ask a broker to say which bank or lender can i use my commissions or bonus 14:51 to allow me to borrow more so not every cell lenders they treat bonuses and commissions 14:59 no it's the same and there's a reason for that wow because there's no way to predict if that's going 15:04 to be continuous yes it's performance-based it is right so so a lot of lenders will want to see at 15:10 least two years yeah and they'll go off the lower of the last two years um as an average yeah and 15:16 then on top of that they'll shave it meaning they won't use 100 of what you earn yeah they'll use 80 15:21 oh wow but then we have some lenders that will use 100 of it and they only need one year's worth wow 15:28 there you go so that's what i mean things like that will allow you to borrow more so that's 15:32 that's one one tip on the income also um your employment rights your if you're casual yeah 15:38 and you're not permanent then some lenders don't want to lend to you because your income is not 15:45 consistent if you take time off if you get sick then you know your income is not going to come 15:50 through the door but if you're permanent you get sick leave and you'll leave and whatnot right yeah 15:55 so then some lenders will allow you to use casual income and 100 of what you earn while others won't 16:03 even accept that so that's why it's important i guess what you mentioned about comparing the bank 16:07 or the broker um so there's the income part if you're now let's look at expenses expense yeah 16:16 so what a lot of people don't know and banks typically don't tell you this 16:20 is that they similar to what i mentioned before about how they use an interest rate as a benchmark 16:26 they also use a minimum expenditure and it's called hem household expenditure measure so 16:35 that those expenses were created by the melbourne institute and all banks that are regulated by apra 16:44 they call them adis authorized deposit-taking institutions they all rely on the hem and the hem 16:50 changes all the time it's updated and that's dependent on where you live so the postcode 16:58 it's dependent on how much income your household earns yeah it's dependent on um how many people 17:05 are in your household how many kids you have wow so yeah yeah keep going so based on where you live 17:12 yeah how many kids you have and what's the so for example if you lived in eastern suburbs of 17:16 sydney yeah and you had a family of five yeah and you lit or you lived in say the western suburbs 17:22 they would expect that that your expense expenses will be higher living in the east 17:26 right of course your income is probably higher too yeah but who knows you might be on similar 17:31 income levels but the expenses are higher here so what that means is that even if you're um prudent 17:39 with your spending or your you know you manage your money well yeah and you spend below that 17:45 hem the bank will still use the higher does that make sense they'll use a higher limit right so 17:51 if you're planning to borrow you're playing the higher limits means based on what i leave 17:55 and how much correct yeah okay and i can't tell you what it is because it's a whole algorithm 18:00 right it's built into the calculator but a broker can check that yeah you could ask a broker say 18:05 based on my situation what's the minimum expenses that a bank will use and then you can review your 18:10 expenses and say am i spending that yeah and then if you're spending more than that yeah you want 18:15 to bring that down right because you don't want to spend more because the bank will go higher 18:19 of the two does that make sense yes so you've got the hem if you spend here 18:23 they're going to use that they've got the hem and you spend here they're going to 18:27 use that yeah so you want to bring it to the hem or below yeah wow that's interesting okay 18:34 yeah let's i need to write down yes next question does business loan affect my home alone 18:43 okay so now we're talking about self-employed right yeah if you're self-employed you you can 18:48 get a business loan yeah and you know different types of business like where it's a commercial 18:52 property loan whether it's a car lease yes or equipment finance or working capital loan 18:59 there's different types of business loans and it depends on the business structure that you 19:05 have so whether you're a sole trader or a proprietor limited um or trust that has a 19:11 you know so it gets a little bit more complicated with trust but essentially if you're a sole trader 19:18 and you've got a loan it's exactly the same as if you've got a loan in outside of like for personal 19:24 use you're still liable for it the same way so so that's got to be included if it's a company 19:31 and you've got debt owing then it depends on uh like let's just say you you've got equipment 19:38 finance on your company yeah that is covered from pre-tax income yes right so then if you're this 19:46 if you're the sole director of that company then you should still include the financial commitment 19:53 meaning that the repayment has to be included but the interest that you pay you can add that back 20:00 as income because that's deductible interest that comes out before before tax and before 20:07 the net profit it's a it's a it's an expense that you pay prior to tax does that make sense 20:13 yeah i think that's it you're specific yeah a little bit complicated but essentially you're 20:18 you're not losing out too much when you have company finance it doesn't affect you nice man Extra tips 20:23 just the few things you mentioned was like wow okay we got already a few tips is there anything 20:29 else regards increasing different tips that most of the people do not know that we need to 20:35 mention often i want to ask you regards something about interest only in principle of interest okay 20:42 another tip that people probably don't know is that having hex can impact your borrowing capacity 20:50 so a lot of people who have studied university yeah australia um typically don't pay for it um 20:55 up front they pay it with a government student loan yes it's called hex or help right and that 21:03 requirement to pay it back is dependent on how much you earn the higher you earn the higher the 21:08 percentage of your income is deducted to cover the repayments on that so some people don't want 21:13 to pay because they're like well i don't need to pay it i'll just pay it when i have to yeah um but 21:18 if you're a high income earner that can be a quite a large amount that's deducted from your your pay 21:24 yes it's stopping you from borrowing so if you're able to use your cash or a gift from parents 21:33 or if you already own property then you can use equity from your property 21:38 to clear the hacks ah there you go and that will allow you to borrow more to increase your buying 21:43 capacity there you go we got a few things there okay thank you so much victor um full 21:49 stop should we talk about this in this video or no because i think we mentioned this i thought it was 22:01 yeah there you go bro we got some juice in there you think is it better to put this 22:07 interest only principle of interest in another video should we leave you like this or should i 22:13 because i remember hearing that um the bone if your parents give you as a moment it does affect 22:18 you because it's technically alone yeah that's the part you could probably ask that question 22:22 so if you were going to get money from uh family yeah how would that how does the bank look at that 22:29 yeah okay i do get a lot of people they say i wanna buy a beautiful unit in the eastern suburbs Getting help from parents 22:37 of sydney but i don't have all the money to buy in the eastern suburbs i'm getting some help from my 22:45 parents how's that work okay so the way that would work is depending on how the money is given to you 22:54 if the parents are lending the money or if they're giving it to you as a gift so typically a bank 23:01 will want confirmation that it's a non-refundable gift so parents will write a letter saying i'm 23:07 gifting my son and or my daughter you know a hundred thousand to help them buy their first 23:12 property right right and depending on the lvr the loan to value ratio that could be enough 23:20 where you don't have to show that you've got your own savings history so what i mean by that is say 23:26 you're borrowing 80 of the property so if you're buying for a million dollars yeah you're borrowing 23:30 800 000 and and your parents are giving you 200 000 you don't need to show any evidence of your 23:37 own savings but if you're borrowing say 90 percent so that your parents are giving you 100 grand 23:47 and you're borrowing 900 000 yeah a million dollar property then even though you're 23:51 getting the money from your parents the bank will still want to see that you've had some 23:56 sort of savings history oh really yeah it's called genuine savings so because when you borrow 90 you 24:03 have to get mortgage insurance lmi they call it and the insurer wants to make sure that you're 24:09 going to be someone that's going to pay your debt back on time if you're just getting money from 24:13 parents how do they know that you've got a history of actually you're covering a mortgage um but 24:19 a lot of people would actually intend to pay their parents back when they sell the property um or 24:26 they have some sort of arrangement where they're going to pay their parents back so this is where 24:30 you have to have that that's stuff outside of the actual loan itself you have an agreement whether 24:36 it's a verbal agreement separate agreement and the parents write up a letter to say that it's 24:40 non-refund can they use their home equity to give to the sun to buy a house yeah so that's called um 24:50 guarantor lending yes so that also works um it's not as straightforward and not every 24:57 bank does it so it's probably good to talk to a broker about it 25:00 but it depends on the parents property and their circumstances so for example if if the parents 25:08 have their home and then they have an investment property yeah and they want to use the investment 25:12 property as guarantor yeah then most banks that do guarantor loans will be fine with that because 25:19 then the parents are not putting their home at risk does that make sense yes and again yeah but 25:26 if it's their home and that's their only property yeah so the parents don't have any other property 25:32 they just have the home then it really comes down to can the parents afford the repayments if 25:41 the kids stop making payments got it all right because they want to make sure the parents 25:45 aren't going to lose their house they don't want to let them end up on the street right 25:49 and of course depend how much they're asking as well yeah and then that's the other thing do they 25:53 have a mortgage owing right if it's already paid off then the risk is lower but if the parents 25:58 have got you know 50 60 lvr still owing against their home and then they want to guarantor yeah 26:04 then it gets a little bit trickier but it's still possible but the maximum that they can 26:09 leverage their home this is the guarantor is 80 lvr so that means that um if you're the children 26:18 and you're buying a property you would borrow 80 from the bank for your portion for your property 26:25 and then the other 20 plus the stamp duty will be secured against the parents and that's the 26:33 guarantor portion does that make sense it does yeah wow okay a lot of things to take over 26:39 okay okay great victor thank you so much appreciate a lot of things i was not aware of and 26:46 thank you so much for your time so if you want to reach out victor i'm going to put the link below 26:50 make sure you push your like button subscribe i'll see you next time