The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK PROPERTIES CREW and PROPERTY LEGENDS in the industry share their experiences and knowledge. Hacks and tips to make you a smarter property GURU :) Learn with exclusive content, advice, insider info and HOT real estate industry PRO SECRETS. For sale, for lease, residential, commercial, buying off the plan, finance, mortgages, interest rates, first home buyer, investments - all topics covered. The untold real estate info you've been waiting for.
The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1391 UNLOCK $100K MORE IN BORROWING POWER: EXPERT HACKS!
•Mark Novak, Billy Drury, Zac Constantinou•Season 29•Episode 1391
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00:00 | 19:04
Navigating the mortgage maze feels increasingly complex in today's economic landscape. But what if unlocking significant borrowing power was simpler than you thought?
Mortgage broker Zach from Shaw joins us to reveal game-changing "100K Hacks" that could dramatically increase your borrowing capacity. Did you know that a $10,000 credit card limit—even with zero balance—can reduce your borrowing power by up to $50,000? Or that different lenders assess self-employed income and business liabilities in drastically different ways? These strategic insights could be the difference between securing your dream property and missing out.
We explore the recent economic developments affecting Australian borrowers, including inflation trends, potential interest rate movements, and policy changes that might reshape lending criteria. For first-home buyers, we dissect how HECS/HELP debt impacts borrowing power and why "rent-vesting" (living with parents while building an investment portfolio) might be the smartest path to property ownership in today's market. Investors will appreciate our discussion on loan structure optimization—converting from interest-only to principal and interest loans could unlock substantial additional borrowing capacity for your next property purchase.
Beyond the technical strategies, Zach emphasizes that timing and expertise matter. Having the right broker match your unique financial situation with the right lender could literally unlock hundreds of thousands in additional borrowing power—even if you've been declined elsewhere. Ready to discover if there's hidden potential in your borrowing capacity? This episode delivers the practical insights you need to maximize your opportunities in today's property market.
Guys, there is an art to lending, but you need an expert. We're going to talk about this morning 100K hacks when you're lending money with mortgage broker Zach from Shaw. Stay tuned, I'm the ringleader, so what's up? What's up, billy?
Speaker 2:
is fired up this morning.
Speaker 1:
What are you fired up for, Bill?
Speaker 3:
100k hacks. Tell me more, yes.
Speaker 1:
Yes, it's true. True, it's true. There is an art to lending. Like most crafts, there's an art to it. And, uh, and this is the man that that, that knows the do's and don'ts. We thought we wouldn't keep to ourselves. We'd share him around with social media people out there, our community.
Speaker 2:
So kind, so kind Picasso the painter.
Speaker 3:
What's going on? You posted an email to us yesterday and there was a lot of heavy bullet points going on in the finance market.
Speaker 2:
Yeah, I hope it wasn't too heavy, but it sounds like you read them all, which was good. That's it. Um, yeah, I think last week was a big week for the whole country with the budget, yep, the election called and we got some cpi information as well, so there was a lot of, a lot of information to to check out throughout last week and then, yeah, sort of roll into this week. They've now got their election campaign rolling. There's an rba meeting today, or was yesterday and today, yeah and um, I think there's actually some more things coming out of the united states on on wednesday, I believe, is some people are terming it Liberation Day for some of the tariffs that actually come into play from the US, which I think you know markets and governments around the world will take some time to digest. So, a busy couple of weeks and lots of numbers and data flying around.
Speaker 3:
I just want to know is it relevant to the everyday Aussie, like all of this?
Speaker 2:
Yeah, I think it is, I suppose especially going into an election season, but I guess, more to the front of everyone's mind. The inflation data. For those that didn't know inflation rose 2.4% which, yes, it still inflates the economy, but it's come down 0.1% from the 12 months to January and the 12 months to December. So again it's trending in the direction that the RBA wants, albeit a little bit slower. Inflation's being a little bit stickier, but you know, that's sort of bolstered by the services prices and the rental market which are still quite buoyant and inflated. So there's still inflation, but it is within the range. But I don't know if it's enough for the RBA to cut again today. I think they cut in February, which was a nice early cut to give some sentiment in the market In February, which was a nice early cut to give some sentiment in the market. I'm not sure if it'll be enough for them to go again and they might even remain impartial until the election runs, until May, and then there's another meeting on the 19th of May.
Speaker 1:
Love it Before we get into the 100K hacks. What's the everyday Aussie question that you get asked?
Speaker 2:
You know, typically like you turn up to an interview, there must be a series of questions that you get asked by your clients when you're opposite them oh, especially right now and since the most recent rate cut, the inquiry and the line of questioning is always around what can I borrow now? Because, as we saw through COVID, borrowing capacities were hit 47%, so you could borrow a million bucks and then after COVID that was down to $580,000. So you're almost halved. And so now, with the rate cuts, there's about a two and a half percent give back.
Speaker 1:
Every time they cut 25 basis points. However, I love that.
Speaker 2:
I love that yeah, so a 25 basis point movement correlates with about a two and a half percent borrowing capacity movement it's done, okay, so that's, that's a.
Speaker 1:
That's a typical question. What's number two question?
Speaker 2:
where should I buy? But I can't really give that advice on where they should buy. It's, um, like there's a lot of people that want to get into the market but they just haven't done the research, they haven't looked at, you know, what might apply to them, purely because the first step is understanding their borrowing capacity and therefore that can inform their purchase decisions. So what they can borrow plus their deposit can then, you know, shape them to some real estate professionals like yourselves and show them what properties they can get into based on what their purchasing power is.
Speaker 1:
And before we move on to the 100K questions, what's the other question they ask when they first meet you?
Speaker 2:
The top three questions yeah, it's sort of how is their current situation made better or improved? So typically I get people coming in with credit cards, afterpays, car loans, personal loans, hecs, and they might have, you know, a small amount of savings so they can't really do too much about it. Maybe they can reduce a credit card or close a credit card. If they do have a chunkier deposit that they may not want to use all of it towards a property, they may choose to pay out one of their car loans or pay some of their HECS down or close a couple of credit cards and therefore, with an unsecured liability, it impacts your borrowing power about four to five times the limit. So if you have a $10, thousand dollar credit card limit, it might be sitting at a zero balance, but that availability to spend is multiplied by, you know, four and a half to five times. So 45 to 50 000 comes off your borrowing capacity purely by just having it open wow oh.
Speaker 1:
So now let's move on to the 100k hacks, and I think we've just breached on one of them there Credit card. What would be the number one like thing where you go, oh shit, on a loan. This has to be changed in the future to get to borrow more money. Credit card, yeah.
Speaker 2:
Oh look, if they've got existing loans like, let's say, we've got an investor that's on interest only investment loans and they're really strapped for borrowing capacity, maybe they can borrow, you know, 300 grand and they want to get a little bit more juice out of the lemon, they can.
Speaker 2:
Or what we can do is put their interest only loans to principal and interest and whilst it's going to be a bit of a hit on cash flow, it's better in the eyes of the bank because you're paying off and building equity straight away.
Speaker 2:
So interest only is great for cash flow and you know you, if your income supports it, you can continue and keep going interest on the interest only. But the way that the bank views it and the opportunity that may be there, is that if you have a 30-year loan and a two-year interest only period, the bank looks at you as if you're paying off that entire loan over 28 years because you're not paying any principal for the two years at interest only. So if we're paying it down, we're paying less interest. So therefore the banks favor that more in serviceability whereby you know if you're, if you're willing to and you can afford from a cash flow perspective to make those principal and interest repayments to then roll into another property. That's a bit of a strategy where we can assess, you know, what the viability and the suitability of it is for it to actually unfold.
Speaker 1:
You know that. Okay, squeezing a lemon. What's number two hack? That's a good hack. What's the number two hack?
Speaker 2:
Yeah, I think. Look, right now I'm seeing and it happens this time every year with business owners, sole traders, self-employed individuals, now the guys that are running their own businesses, their companies, and they're, all you know, realizing their paper profits right now because, with being self-employed, you can delay your tax return until May the following year and therefore now the documentation process starts where their accountant is doing either their tax return, their company tax return, or their financial statements and in those documents, contain the critical details that all the major bank lenders ie your best rate, best product, you know, polished offerings, um are available to. If you've got the documentation, obviously the numbers need to stack from a profit standpoint and how we use those and then what they're taking as an, as an individual, from their business. But it's now I'm doing a lot of self-employed deals where you know they've had some good years. They've had, you know, a good 2024 and a good 2023, if they've got two years to catch up on and they're seeing the numbers that the bank needs to see and we're running scenarios where they can either, you know, upgrade their own iraq or they can buy an investment property, buy a second or third investment property or even, you know, do something with their business.
Speaker 2:
And I guess where the 100k hack is in the self-employed side of things is knowing which lender to use and, you know, working with someone like me to look at your financials and utilize lenders that treat certain things differently. In terms of, if your business is trading profitably but you have business liabilities if you've got a car in your business, if you've got, you know, other liabilities in your business, like equipment, finance and stuff like that there are certain lenders that will not. If you've got a car in your business, if you've got other liabilities in your business, like equipment, finance and stuff like that there are certain lenders that will not expense those, whereas some lenders will expense them further. So serviceability is impacted by liabilities and interest repayments, including cars, equipment finance, stuff like that inside the business, but there are certain lenders that won't expense them. So your borrowing capacity will increase depending on the lender.
Speaker 1:
Because, dr Zach, when I speak to people and they go for a loan to someone they traditionally always use and their heart is broken, often game over, they don't realise what you've just said, that they you know maybe they will submit it incorrectly. So I think that's great what you said that you know. Fitting into the right hands of the right putting it, you deal in the right hand to the right lender, with the right attitude, with the right parameters, can make the difference between no moolah or moolah exactly right and the hard work's been done by the accountant with the tax returns, getting the paperwork together.
Speaker 3:
So you know it's like a two for one. Get it in front of the broker and just see if they can sharpen anything up for you. Yes, there tends to be those deals on the table, particularly when rates have moved, you know, especially in a downward, downward. Um, yeah, no, you're absolutely right.
Speaker 2:
Like I think, like, as I said, the inquiry is is definitely grown this year since the rate cut and, yeah, it's just it. It happens every year at this time when, yeah, people are doing their docs, yeah, and they look at the numbers and they're happy with them and they want to know and we can help.
Speaker 3:
What about first-time buyers and HECS debt? What does that look like?
Speaker 2:
Yeah, so generally we look at the monthly contribution. So if they're full-time employed on their pay slip, if they're earning over a certain amount I think it's currently $65,000 or $75,000, their employer will be making contributions. So we look at what the contribution is under their payslip, which will be written as STSL. It's like Student Training and Study Loans is the acronym for that. So that's what we pick up on and then we just look at the period and then apply it to an expense field under HECS. It's not as much of a hit as, say, a credit card or a personal loan, but it is almost dollar for dollar Okay. So if you've got a 20 grand HECS or a 30 grand HECS, it'll pretty much come off the same amount, unless, of course, you're on a really high income.
Speaker 2:
The higher income, the more you're paying back, sure. So then, the more the expense comes off, the sooner it's gone. Per dollar per dollar, yeah, pretty much.
Speaker 3:
Good to know.
Speaker 2:
Yeah. So I mean, look, there is a bit of a look forward with what the current government's thinking in removing the legislation around banks attributing student loans or study loans to an expense category, because it's you know, it comes out of the pay packet, it's not, and it's tax free right, it's adjusted against CPI, it's not on taxable income, it's completely separate. So they're looking at doing that, which you know it might help quite a few people Pl. Plenty of discussion around housing in the upcoming election, that's for sure um so final hack 400k.
Speaker 2:
Talk to a broker yeah, I mean everyone's different right and everyone's got different. I like um.
Speaker 1:
Does it still work if people um rent rent their property out, so if they go live they decide to live with mum and dad instead and run it as an investment? Does that help to borrow a little bit more money, if they actually do that?
Speaker 2:
yeah, absolutely. And that's a great point, mark, because I'm seeing a lot of people either rent vesting or living at home. And when they're living at home, the opportunity with the banks, you know they might need a stat deck or a letter from the parents saying that you know so-and-so is living here and doesn't have to pay board. But if you look at, say, an average rental in DY, I mean it'd be what? $6.50 a week that you're paying Two bedrooms, bedrooms a little bit more, yeah. So you let's say 650 a week would be your expense if you're properly rent vesting and that's your expense that's factored in for servicing if you're living at home, if you're a single, then it changes to 650 a month as a notional rent expense. So you're getting back sort of 75 the utility of that position, um, based on you living at home. So definitely, definitely a hack there for all the guys living at home wondering, you know, first, property and zach, do you have a spare room at your place?
Speaker 3:
for you, of course. What about for me? What about?
Speaker 1:
for billy, I'll be homeless in about four weeks you might need half a room mate so if, if there's anyone out there in in the world, in the ether world of dy, that billy needs a home and you know her heart goes out to him um soon. So yeah, there's a, you know he could be rent vesting himself very good, I have to run your numbers I like the home investing options.
Speaker 1:
Uh, that's the best I mean that's good, uh, and before you go, before you go, and before you go, before you go, what are rates going to do in the next 12 months? What are rates going to do?
Speaker 2:
I think in the next 12 months we might see a couple more cuts. It will all be dependent on what happens overseas and where our inflation tips. After maybe a change in government. But today I reckon you can't government. But today I reckon you can't use the word depends.
Speaker 1:
You can't use the word depends. Of course it depends. Depends. Tell us what's your punt. What is your punt on rates? Can't say depends on in the next 12 months how much and when in the next 12 months, how much and when? 3.85 by the next 12 months that'll be the bottom. That'll be the bottom rate. That doesn't mean anything to average australian. We need to know percentages and when our percentage deduction so is that a quarter percent next month?
Speaker 2:
so what are we at now? We're at, so what are we at now?
Speaker 1:
We're at 4.1 and to get to 3.85, that's another 25 basis points.
Speaker 2:
So you reckon we'll get a quarter of a percent this year.
Speaker 1:
By the end of this year? Yeah, how far? By what month?
Speaker 2:
That's it depends. Well, there's a meeting in July and I think the unbiased opinion of the markets, which they haven't been right all the time, but maybe they've been a bit more correct than some of the some of the bank economists.
Speaker 1:
They're predicting july, maybe the next 0.25 rate cut, so that might see us through to the end of the year. Love you, you're the best man, you're the best. Didn't say depends. Didn't say depends Billy. Didn't say depends Billy Anything else.
Speaker 3:
Talking to the expert. No, that's it. Give a broker a call. If you haven't for the last 12 months, could be something there on the table free of charge. Just going to make a phone call.
Speaker 1:
Zach, you're New South Wales wide.
Speaker 2:
Yeah, new South Wales wide. Yeah, new South Wales wide. I do deals for clients in Queensland, western Australia. I'm not really restricted geographically, just find me on the phone.
Speaker 1:
Yeah, exactly, zach from Shaw Financial. Give him a call, google him. Billy will whack his details in here as well. Thank you for your help today. It's the question on everyone's lips at the moment with interest rates, so you're very kind to come on off your time and, guys, if you need a great guy.
Speaker 2:
this is the guy we trust. Thank you Mike, thank you Billy. Have a good day, guys.
