Hello and welcome along to the property Academy podcast. I'm your host in McKnight and I am Eugene bird sidekick from Twining financial advisors. And today on the show. We are joined by Eugene Bart's icon from twine financial advisors there and auckland-based mortgage broking and financial advising firm. And the reason we've got Eugene on the show today is we actually came across one of his lending proposals Andrew wasBut because we've got a mutual client and I remember the email actually enter emailed Eugene said I am so impressed with your lending Proposal with the advice that you'd given this particular client go. Let's get you on the show and let's let's have a bit of a chat. So then I read the leading proposal. I was impressed in here we go. We've got your James so Eugene. Thanks for coming along to the show today and thank you for having me on it's a genuine privilege. Oh, no worries at all, and we're over the next five episodes or so. We're going to be talking doing a bit of a deep dive into mortgage. Has and lending and specifically in today's show. We're going to talk about the different ways that Banks treat both investors and first home buyers and which ones are slightly better for investors, which one's a bit of a first home buyers, but just before we get into that Eugene, why don't you just tell us a give us a word or two about twine? Sure. Well, the brand twine actually came from the idea that it's important to actually work together whether were the team to actually intertwined the advice from both your mortgage advisor or accountant or lawyer. I was just realize that early on in my career. I was I was doing a lot of the work Standalone and then the accountant would do something Stand Alone the lawyer would do something stand alone. And there's no Clear Vision. There's no clear plan for the client. And so when we were we were thinking about how to what is a vision for our firm. How do we want to actually operate and help our loans and serve our clients? That's where twine came from its we want to intertwine the advice from from a team of professionals and that's what leads us to Our clients mortgage strategy or property strategy and without that strategy you don't have Clarity and that's that's that's what we're aiming to achieve and I think one of the things and they lending document all the the strategy that you put together for this particular client, which I know a lot of lessons are going to be interested in is how you've broken down the different banks and how they treat investors differently and therefore which ones you would suggest that this particular investor approach. So, can you give us a sense of the different banks lending policies? Why they treat people different because it's not just the interest rate that they offer right? No, absolutely not. I mean the there is difference in interest rate, but honestly that changes on a day-to-day basis is very difficult to say who's always number one competitor in its or the or the second the main difference is really in the lint in the products that the banks offer and what do I mean by products? I mean the the the overall understanding of what is a mortgage. I mean the bank just lend you money and you pay it off over 30 years or Not only and that's that but the reality is that it goes into far more detail. There are offset loans there. There are Regional facilities revolving credits. There are there's a differences between how Banks how Bank Street interest-only versus principal and interest and it varies bank to bank and not sure how it evolved in the particular way, but some banks have become better for investors and some banks in better for owner-occupiers. It's not necessarily who's better. Or thirst home buyers or second home buyers. It's but it's more about what is the underlying security or what is underlying property that that bank is is is holding onto and that's what helps to distinguish which bank has a preference. Exactly. And I know we've talked about some of these different products previously on different shows like the offset accounts or the flexible loans that are available from like beans, it'll TSB we were able to vary the amount that you're paying each year and make that That plan but one of the other things that's really interesting and here is that some banks will charge a higher interest rate for investors. Have I understood that right? Correct. So that actually comes from The Reserve Bank The Reserve Bank actually tells the banks that you need to hold back more capital or in other words more deposit for every loan that they issue. So for example, if the bank is issuing a loan for the purpose of rental investing they need to hold back slightly more deposit if they do so they have a lower. So what banks majority of banks do is they actually allow for a possible extra margin on top and that's become much more of a reality today than it was. It's a few years ago. The banks previously would just absorb it but what's interesting is actually nowadays. Is that a small minority of banks are now officially always absorbing. They don't have a policy to charge investors more with other banks have a clear policy that they will charge and Esther's more and for many others, it's negotiable. So in reality, it's the the policy says it needs to charge more but in practice it's so often times in negotiable. And that's where it's a bit of a gray area depends on how much Equity is being contributed to depends on what other mix of properties that that the client has. Would that bank? Let's say there might be a family home and a rental property together the bank might treat that differently. So it's Case by case and there are You variables and I think the interesting thing is that there are these differences in policies, but they're not really publicized to to the market. Right? You've got almost got to go through a mortgage broker who's dealing with the banks on a day-to-day basis in order to be able to find this out. Why is it that the banks don't kind of publicize these policies and information. Well, if I was working for a bank, I'll probably direct you to where it shows where it explains it on the website, but it's not Easily found sometimes in for some banks, for example, they might have it at the bottom of the page. It talks about interest rates, but it's never at the top of the page if that makes sense. And are you allowed to share which which banks are tend to absorb them that extra Capital requirement versus versus others. So at the moment both T is b and a and z are quite clear that they are absorbing the the the extra margin. So therefore they're not specifically charging more. It's a rental property or a family home. However, what can differ is the amount of cash backs one might receive if it is for rental lending or not. Fantastic. Hey, and the other thing I'm really interested to know is that additional Capital requirement to be at that that the Reserve Bank requires Banks to hold onto when it's an investment property. Does that differ whether it's a new or existing property and second part to the question is well how much additional Capital to the banks need to hold on to the actual specifics? I'm going to have to Look back at my notes, but it is definitely more Capital if it is a new build that the Reserve Bank does allow doesn't allow exemptions for for this however, the banks are still need to report that as for rental investing. And so therefore it's still not the there's still a premium that they need they need to factor in and I think there are really two learnings for investors listing into this. The first is that when you're looking at the special rates that are advertised on Billboard's as you're driving around Always you see them online when you're surfing the internet is that you may not be able to get that specific Earth specific rate at a bank that factors in and passes on some of that additional cost of holding on to more Capital. So even though you can see well you'll be able to get a reasonably low interest rate, but you may not be able to get that three point three nine percent that's being advertised by this bank or that bank and I think the second learning as well is that when you're starting to really get into buying investment properties, that's why you're going to want to work with with a mortgage broker who's Scrolls down the whole page on where speckled begins its site to figure out exactly what those lending policies are and how they work and specific instances as well. Yeah, correct. I mean look the at the bottom of every rate at always says subject to lending criteria and then might actually explain what that lending criteria is you need to have X amount of deposit and you know, 20% deposit or must be for an owner occupied for example, but that's in small print and that's not obvious if that makes sense. Always what can sometimes happen is for those banks that are bit more of a gray area. We can often times try to negotiate some of that margin away. It will still be classified as a rental property, but maybe on that point in time when we're negotiating we may be able to actually achieve that special rate that's being advertised. But you see it's not just scrolling through the pages. We actually getting rates for variety of clients on a daily basis so we can actually see on a day-to-day basis depending on what the circumstances are what sort of rate we can get. And so actually paying attention to the advertisers rates doesn't really lead to what the true reality is. That makes sense. And hey just before we wrap up the show as well something that I think is really important and I imagine most listeners who have tuned in already know this but over the Christmas break. I was down in taranaki catching up with the family and I was talking with one of my family members because they're about to buy a house down in New Plymouth and I said to them you've got to use a mortgage broker. You got to use a mortgage broker. I anybody who's listening to the show for a while. Knows that I'm always going on about it and two interesting things one. They were saying well, why can't we will just do it ourselves well with Cube and we'll just you know, they've already given us the lending, you know, does it ask you to get a cheaper interest rate? You might you might get better terms from other Banks, you know, all of these sorts of things which I think are really important, but maybe they don't they haven't understood the importance of it yet. But also the other interesting thing is that a lot of people I was talking to down there when I was talking about mortgage brokers believe that there is a charge for it that mortgage brokers charge a fee on On top of the loan. Generally the answer is that they don't generally mortgage brokers are there are few exceptions, but generally mortgage brokers are paid a commission from the bank. So for for 99% of situations, we receive a commission from the bank. And so therefore we don't need to charge a fee for the service. Now how many there are KV? It's to that. So for example, you have to read through the fine print of the Brokers agreement some Brokers including ourselves. We actually include a clause that in case a loan is repaid within about two to two and a He is we met on charge any commission that's been clawed back. Now in practice is very rarely ever happens. But this is where the strategy is important. We need to understand. What is the purpose of buying this house with all what's the intention of how long we might we might hold onto this property as well to make sure that that all costs are being taken into account. So although in general there is no fee for the service. But in some instances, please make sure to talk to your broker and and and read through that. At that fine print because it's an important detail where it's important to know what the long-term plan is for this property and I think the key thing from this episode if you take one thing away, it's that each bank has different policies. They will treat you differently and treat investors differently from others different banks. If we're talking about first home buyers will offer different sorts of terms or a more likely to offer you lending and and that's why you do want to play them off of each other, but let's wrap it up there because we're going to get into A lot more detail about all of this in the coming episodes as well now Eugene. Thanks for coming on for the for the first episode of this anymore. Thank you. You'll be here for the next I think four episodes. Now, if you do want to learn more about property with Andrew, and I then why not check out our Epic guide to mortgages, this is something we just released in January and it's a nine and a half thousand would guide that teaches you how to get a mortgage and then how to pay it down quicker. So we're going to drop that link in the show notes. And then also, please don't forget to rate review And subscribe it really Does help us get the message out to more people. Thanks for listening to the property Academy podcast. I'm your host it but Knight and I'm Eugene Birdseye confront wine financial advisors and we gonna be back again tomorrow with even more daily strategies, Texas and insights to help you get the most out of the New Zealand property market and something time.
In this episode, we are joined by Eugene Bartsaikin from Twine Financial Advisers. Eugene is a lending specialist and helps investors structure their lending and financial lives to achieve their goals. During the show, we discuss that banks don't treat investors differently. When banks lend to investors they are required by the Reserve Bank to hold on to more capital than owner-occupiers. This means that there is an additional cost to banks by lending to investors. That's why some banks pass on that additional cost in the form of higher interest rates to investors. But, not all banks pass on this cost. Specifically, ANZ and TSB do not charge investors higher interest rates ... in essence, they absorb that extra charge (at the time of writing). Now, that doesn't mean that you should always put your loans with ANZ or TSB, becuase these rates are negotiable (and those banks may not be in the position to lend to you at the time of your application). That's why it's important to have a good mortgage broker who can negotiate down the additional margin when working with a bank that does pass on that margin. Throughout the show we also referenced the Epic Guide to Mortgages, our 9,500 word guide that teaches you both how to get and then pay down a mortgage. 