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