Pre-Approve or Lose!

Jason · 00:00Welcome to episode 210 of The Numbers Game. I'm Jase. I'm here with Nick and Marty. How are we guys?

Marty · 00:07Going well, Jase. Middle of spring, sun shining, birds are singing, deals are happening. It's uh, it's a good time of year. Liking it, liking it. Uh, Nick, how are you, my friend?

Nick · 00:18Yeah, going good, Marty. Going good.

Nick · 00:19It's um, yeah, middle of spring. That's good. What's happening out there in the market?

Marty · 00:25I said birds are singing. I didn't say anything's happening in the market. There are deals happening, which is good. Nah,

Nick · 00:32things are good, mate. We're just waiting for a rate drop. We think it's getting closer, which is good.

Nick · 00:37Um, so yeah, people are up and about at the moment. It's good. Liking it. Enjoying it.

Marty · 00:41Jase, how are you, my friend?

Jason · 00:43Mate, good, good, real good. I mean, if you can get through the hard slog that are the winter months, um, especially in the accounting profession, May, June, July, August, August. Just, just hell on earth.

Jason · 00:54It's just busy. It's just a rough time in the profession. You just try and keep the morale up and about

Jason · 01:00then September rolls through, you know, 40 finals, all that jazz. And then, you know, we're on, we're on the home straight. I mean, everyone's been talking about Christmas for the last couple of months. So, you know, the countdown's on and we're up and about, and, uh, we've got plenty of, uh, good things to talk about on the numbers game, Marty.

Jason · 01:13You've got, uh, some exciting, uh, An exciting topic for us today.

Marty · 01:17Yeah. Well, I wanted to talk about ensuring you get pre approved. Otherwise you're going to lose in this type of market. And I'm seeing some very good signs in the Melbourne market that I wanted to talk about today. And we've talked about this in the past and I think, uh, Nick on the 200th episode, we've Thought there might be a rate reduction possibly in December.

Marty · 01:37I think you said Nick and I was sort of feb. Um, I think this is coming to roost. We're just saying, you know, a lot of the fixed rates head downwards. I'm looking at the commercial, uh, side of the business where even on short term debt, um, that's coming down as well. So we're seeing some interesting.

Marty · 01:56activity, which makes me think that, um, you know, we're not too

Marty · 02:00far away. And, and just to give you an indication of what spring is doing, uh, there's a fresh, uh, abundance of stock coming onto the market and with softer demand in Melbourne and Sydney, I just think, again, this backs up our idea that the Melbourne market's going to do, uh, pretty well.

Marty · 02:19And there's certainly an appetite. With buyers wanting to buy and vendors that want to sell. And just some, some historic data, you know, year on year increase in pre approval activities is 40 percent up on August, um, September last year. So we're actually. Very very bullish on that in regards to pre approvals in Queensland It's 29 percent up year on year and New South Wales is third with 13 percent Up on pre approvals.

Marty · 02:49The other interesting data is we're starting to see property listings increase Um, so we're up around about 10 percent Overall, so that is a very good sign that

Marty · 03:00vendors are starting to make their move and probably two, you know Probably a month ago You There were a lot of agents out there saying there were a lot of appraisals, but they weren't sort of committing to listing.

Marty · 03:11And we're starting to see the front end data that that actually is now turning into listing. So this is, this is a good sign because we're looking for activity. The other, the other interesting stat, um, from a study shows that 43 percent of Australians, uh, looking to buy a home, um, In the current market with 19 percent of those buyers looking to buy this spring.

Marty · 03:38So again, that's really bullish. That was only around 34 percent last year with only 14 percent buyers looking to buy in the spring. So there's a dramatic increase in appetite to buy vendors looking to sell. And this is an exciting time. And I think if we. If we actually look to,

Marty · 04:00if I look to the next, you know, three to six months and we start to get right cuts, I think we're going to be in a really good position and there's going to be a lot of activity in the market, but, um, But this is the reason why I wanted to bring this up, is you have to get pre approved and have a legitimate pre approval under your belt because you cannot afford to have a rough idea as to what you can borrow because if there's that many buyers in the market, You want to be in a position of strength when you make an offer, particularly as the Melbourne market's price has not gone up.

Marty · 04:38It's been about, I think about five, six months on end where the price has come down on property in Melbourne, just slightly, but it means that while affordability is still where it's at in what people can afford, and it's not dramatically increasing. Then your capacity to borrow and getting the specifics around what your

Marty · 05:00maximum borrowing capacity is, is pivotal to getting your dream home.

Marty · 05:04You do not want to miss out on a home for 20 to 50 grand, you know, and that's going to be a lack of work and you're not getting the advice up front. So this is a must coming up, uh, Resonate Nick.

Nick · 05:16Yeah, definitely, and I think the only thing I'd add to that is don't wait, I think if you're thinking about getting into the market, now is the time to do it, and I'm soloing Melbourne here, um, like I look at the area that I live in, and there's absolutely no doubt that prices are going backwards, um, In comparison to where they were sort of for three to four years ago.

Nick · 05:37So, you know, if you're a, if you're a property upgrader or someone looking, looking to get into the market, now's the time to do it. I think it's pretty clear that the next, uh, right cut or the right move will be down. Just a matter of when, as you've, um, pointed out Marty. And then depending on the times when you're listening to this, but, um, yeah, we're looking at right reductions, uh,

Nick · 06:00overseas.

Nick · 06:00Um, so it's all, it's all good signs, but you, you don't want to be with anything, with any kind of purchase. You don't want to be with the herd. Um, you want to be ahead and the reality is it's the opportunity is there now, like it hasn't been in quite some time. So you need to be prepared. Um, and I would just say to, to bring it forward and to get it done as soon as you can.

Nick · 06:26That's probably the only other thing.

Marty · 06:27Yeah, absolutely. I think, um, again, the chance of you missing out and people leaving it later down the track, like if rates do come down and particularly in Melbourne, if prices are going to escalate, you're going to price yourself out anyway, in regards to the higher price points in the future.

Marty · 06:44So you've got to think about what's available to you now. and make a decision based on that. But I think it is currently a buyer's market because there will be, uh, you know, for the first time in a while, an oversupply of stock coming onto the market. So it means, um, with

Marty · 07:00affordability, price points won't necessarily be jumping up in the short term.

Marty · 07:04So you can really play the position well to buy in that next six months. And I think come out of it for a position of strength. And a lot of time, Um, what borrowers forget about is that there's so much discrepancy in regards to what you can afford from one lender to another, like, and this is, I'm probably having a crack at banks here, but if you go directly to a bank, you're not optimizing your strategy or your maximum capability other than it being luck, because you've gone directly to one lender and in this type of market, you need every sort of edge you can get.

Marty · 07:42And not only do different lenders service different amounts, but also in regards to living costs, how people take how lenders taking into account different living costs in different ways, not to mention stage three tax cuts that people don't even recognize.

Marty · 08:00There's a number of different levers that can get you that extra 20, 50, 75 grand that could mean the difference of you securing a property, um, the agent having confidence in you in taking that offer and getting into that market.

Marty · 08:14So it's really important that you, um, That you dot your I's and cross your T's. Don't just look at, you know, digital websites and get a rough indication because you will miss out if you don't, if you don't get the advice now. So I just wanted to make that as a very important point at the moment. Uh, Jase, I can see you thinking away there.

Jason · 08:36Well, yeah, I mean, as, as somebody who probably falls into the 43 percent of Aussies that are looking to buy and then, you know, 19 percent looking to do it ASAP, you know, this spring, um, just like wondering from your point of view, do you have a few top tips on the main things to get across, you know, either before you go for a pre approval or the things to expect as you're looking to do a pre approval?

Jason · 08:56Is there anything on the hit list that jumps to mind to, to help people get prepared?

Marty · 09:00Yeah, I think you, the reason why you see a professional is to know where you stand. So you want to know. exactly how much of a deposit you need. You want to know if there's any red flags as well. Like, have you not paid a phone bill to do a credit check?

Marty · 09:15Make sure your credit check's okay as well. Um, you want to know what your max limit is. So it might be you're only looking to buy for, let's say, 750, but your max limit is a mil. So you want to know that because you don't want to. You don't want to go in for 7. 50, the property go for 7. 70 and go, You know what?

Marty · 09:35We would have, we would have bought that. And that happens. A lot of people miss out on the property that they want because of that factor alone. They haven't pressure tested their capabilities. So, um, the other thing is, You know, just keeping expenses in check to, you know, you don't want to be overspending all over the place because, you know, there are a lot of lenders will look at that data of what's going through your account, uh, month to month for the

Marty · 10:00last three months.

Marty · 10:00And they'll make an assessment on that, even though they have sort of what they call him metrics of where they think it would be for a couple with two children, but, um, or a single applicant, but they'll still look at the actuality. Of what the expense is. So you want to get some control over that as well.

Marty · 10:17But you want to know where you stand. You want to be confident in your offer, um, because you will be competing with more buyers than Melbourne has seen in the last couple of years, because, and it's not only first home buyers getting in. So landlords. Yes, it's still selling probably at the wrong time because they're not getting the advice, you know, and you know, it's gonna kick again But first homebuyers are buying but what's what I read in the data over the weekend Is that the people with kids that are in townhouses are now thinking about making that move and upsizing So the upsizing market has genuine interest in And the people that even didn't have debt, let's say, are now thinking about, you know, what

Marty · 11:00market stabilizing top range of the interest rates.

Marty · 11:03We might like to sell them by something else as well. So people are making decisions that they want to move on property. Um, and as confidence continues to grow, that will continue to happen. So I think you've got this fantastic window in the next six months to really make you move at a good price. And then, um, Again, as we start to fill that supply, then, uh, you know, Melbourne's got room to grow as we know, so, yeah, but I think, yeah, get, know your numbers and go in with strength and use a mortgage broker to advantage too, like even when you're talking to a real estate agent, um, it's a full approval, a pre approval you're looking for, not just a computer says yes, like little Britain, but, uh, and, and the numbers haven't been done.

Marty · 11:49Get your eyes dotted, your T's crossed and go in with confidence, make strong offers and, you know, win that, win that opportunity for yourself and your family.

Jason · 11:58Marty, typically

Jason · 12:00from start to finish, how long, you know, would you expect a pre approval to take if, if somebody's well organized, got their documents, um, yeah, what, what does the start to finish process look like?

Marty · 12:09Well, really it's a day of doing the discovery process. Like it takes about an hour sitting with a client, half an hour to an hour. From there, documents are accumulated, documents are signed within 24 hours, and you can pretty much, within a week, have a fully approved pre approval. So, yeah, if there's a few red flags, might take a little bit longer to work through, but that's what we're here for, to discover what they could be up front, to ensure when we're going to the lender, that you're in a position of strength.

Marty · 12:38So, we want to alleviate any of those concerns up front and make sure once we go to the lender at the end of the day mortgage brokers are representing you as a client and we put you in the best strength of position to have a favorable result and that's um, That's really important as well. And look like I said, there's there's lots of different things in servicing

Marty · 13:00capacity, but policy as well There's no One person that's the same as another.

Marty · 13:05And, you know, people think about the online digital platforms that give you a right, and it's, yeah, it's for probably 15 percent of the transactions out there, but ultimately every person has a story. And if you sit with a professional work through that story, that's where you discuss your needs, objectives, any pain points to solve, and you do that upfront.

Marty · 13:27So you can ensure. A really, really positive result for what your goal is, uh, to secure that dream property ultimately.

Jason · 13:34And just from a, you know, my point of view is picking your brain. It almost seems like I might be a comedy for a pre approval soon. Does a pre approval get you a document from, from the one lender that you decide like that the mortgage broker helps you to go with the best tailors your scenario, or are you kind of pre approved across a couple of different lenders potentially?

Marty · 13:52Generally, we have a position of strength with you know, generally around three lenders, sometimes it is only one, but you definitely, whichever

Marty · 14:00lender you decide that the best match is for that client is you get a approval in principle documented and that will last you for 90 days and if it has to be, you know, Uh, re looked at in that time that can be done as well.

Marty · 14:13And it's, you know, it's a lot easier on the back end because you've done all the work up front to extend it. But generally we find that a lot of people are actually executing on their pre approvals within that 90 days. And recently, um, it's even been more accelerated. Like people are finding properties within three weeks, two weeks.

Marty · 14:31And it's, um, you know, so we could tell that, that, uh, that the activity is strong with people who want to know where they stand. Executing and finding property, which is exciting as well.

Jason · 14:43It's probably going to be a really, um, weird example to use, but the way I think about getting a pre approval right now, as I'm getting quite excited by it, you know, if you want to go for a run, but you don't get your running gear out for the next morning, you can kind of wake up and go, Oh no, it's too hard.

Jason · 14:57I hear so many people talking about wanting to

Jason · 15:00buy a house. But they don't put themselves in the position to buy. So I'm kind of comparing the, you know, getting organized and putting your running gear out is the same as, you know, get your pre approval sorted. And if you want to buy a house, you're then actually going to put yourself in, in the box seat to be able to secure, um, the dr the property that you're after if you've kind of done that work to get organized.

Marty · 15:20Yeah. And I think Jase, for me, I've, as you know, I've been around for generations, but, um, I've seen people that have said to me from 15 years ago. Thank God we got that extra 20 grand at the time. And now that property that was five fifties worth, you know, 2. And they go, imagine if we didn't go to our maximum at that time.

Marty · 15:42And I feel like, um, yeah. And every individual circumstance is different with what they can afford and everything as well. So you need to do what's wise in your own head, but. Again, it's like the Melbourne property market has been pretty dormant for three years, you know, so it's like you want to

Marty · 16:00be in a position that that extra 20 grand could mean, you know, 400, 500, 000 in 10 years.

Marty · 16:06And that's going to be the debt becomes cheaper as properties grow in time. And it's like that 20 to 50, 000 is going to be, you know, Really of no consequence in the longer term, still got to play it smart. You've got to make sure you're okay with the repayments and everything we do all that. But it's, um, I just bring that up because I've seen people externally that I've spoken to miss out on property and miss out on that upside.

Marty · 16:33And then if the property market does kick and I got to buy for 200 grand more, that's a lot more expensive. Right? So yeah, we've got a window here. Yeah. And I'm just, uh, um, I'm just being a bit adamant on it that this window won't be there forever. And you do have to play your cycles. Um, and we're in a good cycle in Melbourne at the moment, and we can get on the front end of that wave rather than being on the back end and being

Marty · 17:00disappointed.

Jason · 17:00Absolutely

Nick · 17:00love it. Nick? Well, yeah, they only had a couple of points. Marty stole one of them, but I'll just, I'll just reiterate cause it's spot on. But, um, Yeah, just stretch yourself, yeah, like the one thing I've learned in 17 years of doing home loans is that first property, really any property that you buy, very rarely is it comfortable.

Nick · 17:19It's just not. You always think, holy shit, I've overspent here. Like I could nearly say that about 99 percent of the people that I've dealt with. And look, the reality is if you're in a particular market, as in type of property and suburb, the price is what people are willing to pay. So. You know, if you set your limit at, you know, 800 K or a million bucks and everything keeps going from a million and 50, then you're in the wrong market.

Nick · 17:45That's just the reality. So I really like what Marty said, go to your max and absolutely be prepared to be uncomfortable. Because it always is a tough pill to swallow when you buy that place. Everyone goes over, um, very rarely that they

Nick · 18:00don't, and I'm sure there are circumstances over there where people haven't gone over what they think their max is, but generally they go more than what they would like to spend, I guess, is the best way to explain it.

Nick · 18:09So be prepared to do that. Um, and the only other thing I'm. That, that I'm hearing, which, um, is just simple maths really. But when people say, Oh, look, yeah, we're thinking about upgrading, but it's not the time to sell. Well, it's the time to sell because it's the time to buy. So, yeah, I'm not trying to be a smart ass here, but you've got to do the simple maths.

Nick · 18:31If you're in a million dollar house and you need a bigger house because you've had an extra child or, you know, you want that family home, you know, and the market's down 5%, well, the 5 percent you lose on your property, which is 50 grand on the two million dollar house, you're picking up a hundred grand.

Nick · 18:46So just make sure you're thinking about that. I know it seems simple, but a lot of people don't think that way. They think, Oh, we shouldn't sell ours. We're not going to get the right price, but you're selling it to get a cheaper price on the next one. So as long as you're buying in the same markets that are,

Nick · 19:00that is, and most people generally are.

Nick · 19:01So. Just think about the whole transaction, not just geez, our house isn't, um, isn't what we thought it was worth or in some circumstances, I was talking to someone the other day, um, where their house has actually come back considerably, like almost by 10%, um, but they know they're going to get that 10 percent on the next one, which is that bigger asset that they wanted in the next four or five years.

Nick · 19:24So they're considering just taking the loss on their house because they know they're going to pick it up and some on the next acquisition. That's, that's, that's the thought process you need to have in this market that is down a little bit. Um, and yeah, the opportunity we're like, we're talking about a down market, but Melbourne actually hasn't gone backwards.

Nick · 19:44Um, obviously the last few months has been some backwards trends, but over the four years, it's still grown. It's gone backwards with inflation. So, and then we're now talking about that next leg up. So there is definitely opportunity there because it's, it's not going back any further. Um, Well, not, not

Nick · 20:00to a greater deal.

Marty · 20:00I think the market's come to that conclusion too, Nick. I think people are sort of held out, held out, seeing what's going on. It's been two years, three years, and they're now going, right. It's always great to upsize in a sideways market, you know, because you're, like you said, you're getting value on the new buy.

Marty · 20:17Yeah, it just makes sense. But I think the market's starting to understand that and they're going, this is the time. And that's why we're seeing increased listing, increased buyer activities. It's a momentum game as well. And if there's still a, if there's still a sort of, uh, Yeah, there's enough supply. It doesn't mean property is going to go up in the interim, but I guarantee as rates come down and borrowing capacity goes up again, then there's going to be a spike because people are going to stretch further and further.

Marty · 20:47So I'm just sort of helping those without. Without force, just directing and saying, you know, six month window, and you could do really well here, particularly in Melbourne.

Jason · 20:58Yeah, a hundred percent. And,

Jason · 21:00um, just to cut in with a little bit of a warning as well, just some things that we're seeing at, uh, accounting, accounting side and future side, um, We've got a lot of, uh, investors or property owners that, that are basically looking to sell because, you know, interest rates have gone up and they're, you know, they're worried their property is going backwards and that, you know, they're not making the money they thought they'd be making on their property.

Jason · 21:20You know, what I would say is before you rush to do anything with that property, you know, speak to, uh, A mortgage broker and a financial advisor who can actually map out how the next couple of years are looking from, from a projections and property point of view, um, just to kind of get a deeper understanding of the numbers.

Jason · 21:36I think when we make emotional decisions and say, oh geez, well the property lost 10 grand this year or five grand, or it's affecting my cashflow. We've come through the worst of it though. You know, as far as we're concerned, we, we're, we're thinking we're going to see some rate reductions soon. Um. And we're on the verge, especially if the properties, you know, Melbourne or Victoria based, you know, we're thinking we're going to see some pretty, pretty good upside in property prices.

Jason · 21:58It'd be devastating if, you know,

Jason · 22:00you offloaded your investment property now to miss out on that upside. You know, everyone's circumstances are different. So that's why I do stress to speak to your broker about what's happening with your home loan. Speak to a financial advisor about, you know, what your options are.

Jason · 22:13Um, but yeah, don't, don't rush out there and do something that you may live to regret down the track.

Marty · 22:18Yeah, great, great advice. So many people are three feet from gold and lose the opportunity. And again, even if you're in a position where you have to sell, then talking to a planner is, is paramount because at least you want to know what are the capital gains, what you could do to, you know, with that money, um, and have at least a plan of attack forward.

Marty · 22:37And I know with. Just on the finance side, you know, just to refinance can save people money. And, but people are emotional, they're losing their minds over 50 bucks a week. And that's, you know, there are deeper reasons for that, no doubt. But again, good to get the facts and get a blueprint forward. So you can then, you know, know where you stand and execute.

Marty · 22:58Cause it's a lot more costly to

Marty · 23:00sell. And then. Buy up again, if, if that was an original hold strategy, right? So, so it's a independent circumstances, but know your game and know the strategy and the play behind it. Very important.

Jason · 23:13Love it. Well, Marty, appreciate you sharing the, uh, pre approval lose. It's got me excited.

Jason · 23:17And I think I'll be going running home to case to tell her to get her documents in order so we can get a. Get a meeting booked in with yourself, Marty, or one of the amazing team at Innovate. So, um, if it sounds like something you want to do at home, definitely reach out to the Innovate team. They've got you covered for your, all your pre approval needs.

Jason · 23:34Until next time,

Marty · 23:35you're approved. Game over.

Jason · 23:38This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional. Individuals on the podcast may hold positions in the companies discussed. ---