Introduction To Mortgage Brokers
Ben Crowther 0:05
Could you just introduce yourself to everyone listening? If you could?
Allen Chan 0:09
Yeah, so my name is Allen Chan, Director, founder of ZENRG Finance. Synergy was founded in November 2012. So it's been almost 10 years in the making. So I, myself been a banker, and previous to be a mortgage broker, starlings energy. And I've been doing that since I was a graduate. So that's over 15 years. So synergy has grown from a little mortgage broker to now a group of mortgage brokers with the philosophy of we grow with you. And that is making sure that our clients get looked after. And just giving them the peace of mind when it comes to, you know, finances. So yeah, that's a bit about energy finance.
Ben Crowther 0:56
Fantastic. So why should someone choose a mortgage broker
Allen Chan 1:02
over a bank? Yeah, definitely. Mortgage Broker understands the client's situation. So you're not treated as a number, then we want to sit down and understand what are your immediate needs, but more importantly, what are your short term or long term goals. For example, if you are a first time buyer, of course, the immediate need is to get into a property. So we have to understand your current situation, and look at options that are best suited to your current scenario. And we have probably over 20 lenders that we can compare not only interest rates, but you know, based on your financial scenario, it's just a simple one, some people like what they call PAYG, or earning income called Pay As You Earn, or you could be self employed. So it's quite different in terms of the lenders that could be involved. Now, when I say first time buyer, we want to get you into first home with could be little or no deposit in some scenarios. But with the short term and long term view to enter, we pay down their loan fast, if that's one of your objectives, or, you know, looking at increasing your investment portfolio down the future. So we're just not one size that fits all, we really take the time to really understand yourself. Whereas the banks will probably just look at the immediate need, but later on, if you're looking to get a better rate, you're probably stuck with a lender. We may not talk about it now. But you know, another topic is that it's called loyalty tax, or loyalty interest that you pay. So we may cover that sometime in the future, then. Yeah, cool.
Ben Crowther 2:41
So we know how banks make their money. How is it that mortgage brokers make? earn their living?
Allen Chan 2:50
Yeah, sure. I mean, we get paid by the lenders, an upfront commission, and also a trailing commission for looking at that this relationship. You might be thinking, Okay, well, why is the bank paying you some money to facilitate the loan? Well, firstly, mortgage brokers are not bound by your business hours, usually, we do work weekends, at times, for appointments and so forth. But it's just mortgage brokers is a way to help the lenders like a marketing channel, right? To talk about their products features. Brokers are bounded by this law called Best Interest duty. So it's not like, Hey, this is big for Linda, then we should be sending business, because we're getting the most Commission. In fact, it's very similar commissions across the board. And it isn't enough right commission and trailing commission. So it is in our best interest to select the scenario that fits for yourself, man or client. And then we get, you know, some upfront commission as a result, so we call it we get paid based on results.
Ben Crowther 3:50
That's awesome. So what's the process of dealing with a mortgage broker or close to say back?
Allen Chan 3:58
Sure, I mean, in terms of dealing with a bank, you have to probably rock up to the lender or the bank, and then book in a time to see them and go for your situation. The only downside is if there's any challenges or hiccups, right, then you need to explain your situation, again, with the lender to right, or lender three and so forth. Right with mortgage broker, explaining your situation once. I mean, we can't guarantee approval, but should there be any hiccups or challenges, which is unlikely or very rare, then we got kind of like a backup option where your same scenario and situation is quite easy. Mostly now. We've COVID Recently, the lenders have open up you know, facilities like zoom. So it may not have to necessarily be face to face and the ID requirements they got the system to verify the identity which is quite smooth. In fact, you know, it can be a paperless process from end to end with some length. You don't need even need to print a form or sign anything? Because it's virtually signed been? Okay. Well,
Ben Crowther 5:05
okay, that's Yeah, that's so there any hidden fees or costs in purchasing a property that the most people wouldn't be aware of?
Allen Chan 5:20
Sure. I mean, part of our processes is to make sure we educate you or our clients in terms of purchasing a property, what are the upfront costs. And also, as part of the best interest, Judy, we need to look at the fees and charges with each of their respective lenders, let's say we have three lenders that we're comparing, it will highlight what are the upfront costs, and also some some lenders may be having a professional package, which is ongoing annual fee, these are all disclosed, as part of our statement of credit advice before we proceed, and you're more than welcome to ask questions before we even proceed to the transaction. So definitely, there's no hidden fees. But of course, you know, as you go down the track of your buying property, there's some adjustments towards the end. But that's more like a solicitors role to educate the clients to make sure they're not overpaying and checking make sure everything's correct.
Ben Crowther 6:13
So the other thing I know, personally is, and friends I know is the question is always, are we ready to buy a property? How does this house sauna be become aware that they are ready to make that commitment? Because it is
Allen Chan 6:30
a huge commitment? Yeah, definitely. I mean, most of will, in terms of the first step, all our brokers are trained to is qualify the client. So asking things like, I mean, there's definitely income questions that we ask, amount of deposit, what type of deposit, he's any assistance from family, or other cash that's hidden down the bed. So we asked a lot of questions to qualify to make sure that we leave no stone unturned. And I think that's where we, you know, make a difference to other bankers. Because we really take the time and spend that one hour, not only a covering that question, but also the education. Because in the bank, I mean, it is a business and some of them are employed, they need to get your loan approved, but we've been established a long time. So we don't necessarily need to do to, to make, make sure there's food and lights on the table, right? We want to make sure we're passionate about and qualifying that process to make sure Ben, hey, we've exhausted all avenues. We looked at over 20 Different lenders. And yes, we can either do this transaction, or no, we need XYZ as a strategy to kind of improve your situation. And, you know, obviously 80% would know that they're ready to buy after our interview questions. However, the basket that may not be ready now doesn't mean he's forgotten. Because we have many clients in that basket, which of you like six months, or even a year later, the situation has changed, they come back, and then again, as a result of those questions, we facilitated home loan with them. So I think, don't be afraid to ask, I think that's the key. But also taking on that feedback. If it's not ready doesn't mean it's unknown in the future. It just means at this stage, it may not be worth it to apply and put a credit inquiry on your file. But you know, these are the factors to work on so we can improve your situation.
Ben Crowther 8:26
I guess some people might be quite naive about what what's required, therefore, going through that process and gaining and be given goals and things to focus on makes things a lot easier.
Allen Chan 8:37
Yes, yes, definitely. Even on the document capture process, it's taking photos through an app that we use called Easy dogs. So it's just your ID supporting documents. Because sometimes when we're part of our qualifying questions is income. And more often than not clients will go earn X was 100,000. But that's a breakdown of, you know, commissions over time and different bits and pieces. And in fact, until we look at a pace level, it really affects the maximum borrowing capacity, whether it's your first home refinancing or the next investment purchase. So I think they may think they know Hey, is this what you need? He does a number, but we go a bit deeper and make sure we give you that clarity, and anything in anything. We want to see where you're at. So we know where we can take you. Okay.
Ben Crowther 9:29
Great. Um, so if someone's looking to get into the market, what's what's the kind of advice you'd get? You know, if they say, Hey, look,
we want to buy a house in 12 months time. What advice would you give someone to make sure that they're, they're as prepared as they can be? When before they come to you?
Allen Chan 9:48
Well, I think the third thing I mean, it depends if their first home and I'm just talking about first time, Ben, and for the last 24 months, given the pandemic situation, the government's allowed a lot more incentive. In the market, where there's first home loan deposit schemes first home and undergrad, first homebuyers assistance. Now I'm rolling up my tongue some of these programs available. Education is a key doing the research what you're entitled to. That's number one. Secondly, is a question we normally asked is how much savings Do you have you saved? And then savings is like, yes, I'd say 50, or 100, or whatever the number is, the main important thing is how is that saved? Is that genuinely saved over a period of three months? Is it a gift from their parents or related party was in a sale from a property light? You know, these are the clarity that we ask. But don't be disappointed if it's saving that's not genuinely saved? We met us, I know you're renting. Have you been paying your rent on time? I mean, these are the things that it was provided by us before going to mortgage, pay your rent on time in the next six months, have a good savings, whether it's from your parents related party accessing to someone good deposit. And the third thing we would ask is definitely your income. You know, like I said, Are you clear on your income? Is it 100k? Just the base salaries and commissions over time? We need to have that clarity on that. But more importantly, after that, is looking at some of your liabilities, right? So Little did you know most clients know like, for example, have you studied and accumulate a bit of hex, right? Hex, or held right debt, this this can impact the borrowing capacity, or accumulation of credit cards, even though they always say, Hey, I paid on time, and but the limit is 20 grand, and 20 grand is probably a big dent upon the borrowing capacity. Okay. Yeah, sure. personal loans, car loans. These are the what we call bad debt or, or liabilities that can affect your borrowing capacity. Yeah, so I think the best thing is booking the time we've done an hour expense, sit down, see where you're at. And I think that's the best way you can ever do in terms of knowing where you where you stand. All right.
Ben Crowther 11:59
Yeah. You touched on before the people people sit personal situations might change the amount of deposit they need. Can you just expand a little bit more on that?
Allen Chan 12:14
Sure. So deposit. I mean, firstly, the schemes available. The FHL DS or first home loan deposit scheme is just having that 5% deposit. And then there's no longer mortgage insurance with the lenders that they work with. So you're literally borrowing 95% of the property amount. Some lenders, or not most will require that to be genuinely saved, right? So over a period of three months, so it's not like just a lump sum from Mom, I've got pockets anyway. And also, there's some eligibility requirements in that scheme. You know, you're Australian citizen, you single or you're married. And there's certain thresholds. I mean, we can put a link below I mean, it's on our website to really find out that clarity because it can't change. Right. But in terms of deposit, it's just, you know, the common deposits is you saving up, there's gift from the parents, right. We see inheritances, right. And also, it could be sale of some sort of shares crypto or some sort of asset car, right, that can help us facilitate this person purchase. So I mean, you know, we will go through that find questions and see if we can do it. Right. I think that's the key idea.
Ben Crowther 13:35
And when you're when you're purchasing people, I know, people can get a little bit nervous. Is there any ways? Or what's the best way to insulate or protect myself or when we're moving forward with the purchase of a home?
Allen Chan 13:51
Well, again, I don't want to sound like we're selling ourselves like, but it's sitting down with a mortgage for a good mortgage broker to really go through that process and journey and education, right. I mean, we do like hundreds of transactions more than hundreds of transactions a year. Right. So we're pretty good in terms of what we do. We've been doing it a long time. But it's more explaining that into in process, because there could be a lot involved, right? I mean, Ben, I know you're in marketing and websites. Of course, if we asked you like some technical stuff on Google, and you'll be thrown away, you'll have the hand side of the interviewing process. That's the same with your finances. Like if you don't do this every day, I don't expect you to know. So therefore, we will take the time to educate a what's needed first, what do you need to plan and that's probably the discovery session that we have. And we do a fact finding session which is your personal information along with what you're uploaded. So we can verify okay, we can actually borrow X amount, then we're part of our best interest duty. We asked that list of questions and present a list of products up to four different products. Scenario And then we select one, which we go through with a period removal process. So I think all in all, like compared to five or 10 years ago, I mean, the government's done well to have a lot more compliance into some mortgage brokers, which is a great thing. Not so much for us, because there's a little bit more at the way, but it's well needed to make sure we protect you. And then so you're aware what the journey is and where you're at. Okay. Plus, mortgage brokers are free, like I said before, because we get paid by the lender, once it settles on an upfront and trailing commission. But you know, in between the process before is, is no touch right at this day.
Ben Crowther 15:41
So, the one other thing is, once you purchase your home, would you suggest things? Will I'm assuming you would have one at home and contents housing insurance, but maybe other things like life insurance or income protection, things like that?
Allen Chan 15:56
Yes, we do. And again, part of our best interest duty is to ask those questions, then. So do you have adequate income protection? Do you have adequate life insurance? Do you have adequate, you know, other life trauma or disability like those sorts of insurances in case in a van Touchwood, nothing happens. But if we did, like we spoke about that to mitigate your risk, away to your home and contents and health insurance, car insurance, the lot, even questioning there as part of a bid, you have a wheel, right? So most often as couples, they buy a property, which is a great thing and fantastic news. But later on they they find they haven't got a will in place, and they have kids and Touchwood nothing happened if it did what what would happen to that property? So it's not a comfortable question that we usually ask, but it's needed. It's part of our duty to make sure that our we don't want a scenario where Ben Allen didn't tell me this or I didn't. So we've got probably more than 50 questions that we ask, you know, as to make sure we cover all those risks.
Ben Crowther 17:00
And I guess at the moment we're all far more aware of of work and employment due to COVID. You know, that? What turn up to two and a half years and from beginning to end? I think there are a lot of people far more conscious about, about how easily your income can can vanish in a situation like that now.
Allen Chan 17:23
Yes, yes. And that's where even, you know, labor, I'm sure we talked about, I mean, you know, you're you're asked a lot about first home buyer, which is, you know, the topic of conversation at the moment getting a home, given property prices are going up. You know, as you have a home, the other thing that we talked about is, you know, doing equity release, or cash out is to alleviate some of these buffers. In fact, I wanted to share a story, one of our clients that I've, you know, we said it's time to do a cash out offer, whether it's for investment, they didn't end up using that investment. But it's a blessing that they got the cash out from our equity release from their property, because not only one, but both of them ended up not having a day jobs, right. So during the pandemic time, so therefore, this buffer helped them go through and move on with that tough situation. But imagine, they didn't do that exercise reverse, then they would have had to rank the bank in and tell them that, hey, we're affected by covert, we need to pause our payments, we can't make it in time and and then they could potentially have some sort of a negative impact to their credit rating, right. Which didn't happen for these clients. So what I'm sharing is that we understand there's risks things can we just want to make sure that you get the money from the banks when you can right, or, you know, that there's some release of equity. So it's doing that mitigates to protect the risk?
Ben Crowther 18:51
Yeah, great. And I always remember hearing saying, The, you should always buy land, because it's one thing they're not making any more of.
Allen Chan 19:00
Yeah, well, I think assets, I mean, I've learned really understood the meaning of inflation now, right? I mean, we're all impacted by that, and what's inflation? And, you know, want to make sure that definition with my kids, like, you know, if you're buying a bottle of milk in 2022, in 10 years time, 2032, it may not cost the same, right. And that inflated costs is what we call inflation. So I guess, you know, that's why there's a rush at the moment for many people to buy assets, so has been an asset or their first home, or even government's having some programs encourage that, which is, you know, just understanding whether you can afford it. And I think the other thing talking to us to make sure that, hey, I understand the interest rates are low. So talking about, you know, do we have it as a variable, do we fix it? You know, can you manage your repayments if interest rates continue to go up? These are the conversations quite real when we have it, because it is a 30 year mortgage. It's not like Hey, it is a few $1,000 This is for the next 30 years. So by instead of paying rent, you're paying this repayment. But over time you build out a thing called equity, because you're paying down your debt. And then we can look at your short term and long term goals, which is what we're about.
Ben Crowther 20:16
And then the end is just talk about securing the future, isn't it?
Allen Chan 20:20
Yes, I think so. Because people just focus on this immediate goal and does the White House but I feel its energy, what we do well, is understanding the life stages of finance, right? There's life stage in terms of human being, like, you know, being an infant, being a teenager, young adult, and then, you know, maturity, that goes the same into financing needs, right. So again, we're focusing a bit more in the beginning stages, which is usually could be a single young couple, and want to buy their first time. But as we go through their life stage of their finances, build up equity, common questions is a Alan, can you help us with an investment property? We don't do it ourselves? Well, we've got experts that we can recommend to. And that's to build an investment portfolio, whether it's in their names, different structures, taxation advice, again, we got partners that we can refer to, because that's the next stage right? You pay off a bit of equity. And then you go is this all there is? Probably there's a bit more some clients short term and long term goals is to build some sort of a passive income, the next investment or multiple investment properties. But you know, the question that we asked whether is it the best in terms of lineal names or different accounting structures. And then, as we move along, and they have a few kids, and they build up a portfolio and maybe want to buy in different trust structures, or in their super, right, so that's the common where we move from the second stage to level three, which is a bit more sophisticated, we really want to understand your, you know, short term, long term goals that we need to get some equity from properties. And this, like, you know, process could be a five year process could be 10 years could be 20 years, right? Yeah, this is where we need to as a mortgage broker and zenergy revisit with the clients minimum is annually to kind of check in is the goal is to align to what you wanted to do? Or has circumstances change, right? You know, I have a kid or have two kids. You know, I'm divorced, right? So these common life instances do happen, and then it affects the way that we need finance. So I think we got to see it just like a medical light, or as we're aging, right? Are we growing? There's different needs. And that's what this energy is there, and we're there to grow with you.
Ben Crowther 22:39
That's fantastic. How's technology change the way we get along?
Allen Chan 22:44
Oh, Ben, technologies definitely changed the way that we deal with clients. Definitely, we're on zoom at the moment. So that's one tool that we use. And then there's other things like, you know, easy dogs, which is a document upload feature. So no longer is printing paper and sending it through a one by one, it's a secure site, which you take a photo or upload that document, then we've got that access, or our team has access to that to verify to make sure we provide that clarity, the others like Docusign. And then, which is a document signing, digitally signing. But of course, there's other platforms that the lenders use. Because there's so much complexity, Ben, nowadays, with apps on your phone and these these different tools, I view as energy finance is kind of like your digital shepherds in guiding you along, to make sure that at different stages of the process, that kind of go Ben Hey, he's 123, you need to action steps. But more importantly, these are things you need to watch out for. So just like the banks have rolled out DocuSign, which is old, most of them have or digital signing. Sometimes they because we do so many applications, we know we can guide you been Hey, make sure you click this, this is going to have a password sent to your phone, right? Just make sure that you fill in here at this spot. Because they say hey, it's easy for the banks, but it's still maybe a complex document that you're signing up. So Ron's energy or the brokers to make sure that you're doing the right thing, or when it comes to the beginning, Hey, what's that Zoom link? What do I need to do to book in, just like how we facilitated this appointment when you had to click on a link and check my calendar, so it's kind of like they're streamlining. Previously, what we had to do is like ring, Ben, Hey, are you free there? Let me check my calendar. So that's another 510 minute job. Without you know, much productivity now is just educating you, hey, it's a link what's going to happen? This is what you need to do. So it's a bit more explaining if that makes sense. Because help us get quicker but if we're out there explaining, then guidance or advice, I think even if you had DocuSign any tool you may not know how to use it is Uh, yeah. So Well, I
Ben Crowther 25:01
think I think a lot of people who aren't using technology every day, in a way, say yourself and I do, it can become quite daunting. The amount of links and, and different technologies that are used for one goal, it can become very daunting, like working with you, Ben
Allen Chan 25:18
to have a bit more how to videos or laying, you know, break it down. This is a section that you have to have, I've exhausted all the links. I know, I shouldn't be talking about another light. I mean, Tesla is a company that love but in terms of their app, they have a lot of how to videos and hopefully answers 80 to 90% of the questions. I'm not saying not to call us. And that's not the point. But it's more like, you know, looking at ways to get your problem resolved, basically,
Ben Crowther 25:45
right, yeah, give us give yourself the confidence to tackle these problems as well.
Allen Chan 25:50
Because I think buying a house refinancing or purchasing next investment properties, to some people may be a very complex situation, then what we're good at is dissecting our two like three parts. And within the first part, then micro action steps that, you know, go through like exam, you know, it's pass and then you go to the next stage. Right. So I think that's what you know, like, we discussed the digital digital shepherding, right to make sure the clients are, you know, going through that journey be more smoother.
Ben Crowther 26:20
Yeah, avoiding any sort of pitfalls that might might be might pop up. Correct. Um, one final question, when you how long can it isn't until you can refinance your home after you purchase?
Allen Chan 26:35
Yeah, great question, then. Usually we some lenders, they take it three month Home Loan statement to refinance, but the usual standard is the six months, right? Because they want to see a bit of track record, have you been paying on time? What's the repayment history? So most important, some clients think that if I refinance from lender A to B, and then if I and it's only been three months, does that mean I can't refinance a lender C? Well, as long as lender A and B, you got total six months worth of payment and repayment history from these two different lenders, we can refinance. And in fact, at the moment, given the pandemic, I know there's some rates that are going up. And that's more like the fixed rates, but refinancing, there's a lot of cashback that's available, some lenders offering anywhere from 2000, up to $4,000. Just to have your business, you know, refinance, to that new particular lender. So I think it is quite important to understand, it's not like, hey, if it's anything less than six months, I would wait. But if you've got six months history, then definitely contact us. If you haven't done so in the last two years, I think we really need you to have a look at these loyalty tags, with the lenders. But you know, suggestion and a tip, if you want to ring up, it will always negotiate. But if they're not giving you something that's sexy or competitive, please speak to us or a mortgage broker that can help you get you a better deal.
Ben Crowther 28:04
Well, you've mentioned that loyalty tax a few times now. Well, can you just go a little bit deeper into that?
Allen Chan 28:12
And this is, I think, a great point of difference and unique selling proposition between lenders, banks or brokers? Why, let's say bank, Ben went to a bank four years ago, and he's been paying his home loan healthy Lee on time, and promptly. Sometimes they don't have a program which will proactively Call Ben because there's rate adjustments, especially with the pandemic, I think four years ago, you will be I mean, I'm just quoting here, approx, just use round numbers could be 4%. But with the pandemic, it would have dropped at least 1% to, you know, low low threes, if not like mid twos, right. So they're not contacting their clients, unfortunately, compared to a mortgage broker, which, in our best interests, we should be reviewing our client's home loans every year. That sort of difference and we call Ben and hey, look, I know you we've Linda x, but you know, Linda, was offering this offer did you want to change? That's the first question. If your answer is no, I don't want to change we go back to Ben's lender eggs to negotiate a better deal, which 99% or 90% of the time they will say yes, we'll adjust it to the lower rate right if they can ignore the broker will be refinancing until the lender why which is a better deal, a better interest rate. So I think this is what we call the loyalty tax. I've seen clients that wish it was so loyal, is a true story, like 10 years with a particular vendor. And then there were like a right that I just fell out of the chair because it was so high. So therefore, I'm just saying that, you know, the clients like wanted to stay but then I said to the, to the client, would the bank refund you the difference of potential savings out you would have got over these 10 years? We both know that he There's no but that's why you need a mortgage broker on your side. Keep them accountable and see, hey, what's the market interest rate that you should be paying, whether it's with the lender doesn't matter or with another lender, but just making sure clients get a better deal.
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