Lawrie Moore says property buyers and investors need to be proactive when exploring lenders, loan structures and rates to achieve the property finance outcome.
Lawrie is a respected and trusted Senior Broker partner at KnowHow Property.
He joined Bushy Martin on Property Hub’s Get Invested podcast to discuss how to maximise capacity, while minimising costs and risks.
Property finance tip 1: Don’t go directly to the bank
Lawrie said the biggest mistake buyers and investors make is going directly to the bank – institutions that only have ‘their own interests at heart’.
“Going directly to the bank is putting money in their pocket. You go there if you’re happy to pay a higher interest rate or higher loan costs, you’ve got the money and you don’t really care about the consequences, then go directly to the bank. But if not, if you’ve got the time and the energy and the expertise, compare 40 plus lenders and 2000 plus loan products. Although I can assure you it’s a full time job, because I do it all the time, so don’t take it on by yourself,” he said.
Property finance tip 2: Explore your options
Lawrie urged buyers and investors to expand their research of banks and lenders, and to not assume the lowest rate is always the cheapest solution.
“It’s not always the case that the lowest interest rate is the best loan. There are other aspects associated with that, such as the fees, charges and offset accounts that can help save you money over time,” Lawrie said.
“There are also the other aspects around capacity. So if you’re going to your own bank, they’re just going to give you one answer in terms of capacity. However, if you look across a broad range of banks and lenders, this is going to give you a completely different sphere of what is actually possible. Some lenders are prepared to take on more risk than others and have different policies. There are so many different variables, and every person’s situation is unique, and so you’ve got to try and match that with the right lender to get the best possible outcome in terms of price and in terms of capacity.
“That’s why we recommend using a broker. In fact, around 70% of loans now are written by mortgage brokers. There’s thousands of loan solutions that can help to maximise your capacity while minimising costs and risk. So it’s about ensuring the structure is right, because the structure is going to be the key to making sure that you’re paying the lowest amount possible and that it’s costing you as little as possible and that you’re not opening yourself up to risk. You also want to make sure that your loan portfolio is best structured to enable you to act as quickly as possible, rather than have to go through a whole set of hoops in order to achieve what you want.”
Property finance tip 3: Consider the costs of loyalty
Bushy encouraged property owners and investors to stay proactive and always seek a better solution, rather than staying loyal to one bank for an extended period of time.
“The amount of money that people are costing themselves by sticking with a bank is huge. We’re talking thousands of dollars, tens of thousands of dollars, over the long term. What a lot of people don’t realise is that lending policies are changing almost by the day and week. So just because the bank says no now, doesn’t mean that you shouldn’t be revisiting it on a regular basis, because things are changing constantly, and it’s not a set in stone exercise,” he said.
Property finance tip 4: Find the right mortgage broker
Buyers and investors need to ask the right questions to ensure they’re working with a knowledgeable, dedicated and active mortgage broker.
“Over a six month period last year, 22% of brokers were completely inactive. And there’s a lot of experience and knowledge that goes into being a good broker. Experience, resilience, grit, determination – you’ve really got to enjoy getting in and going down rabbit holes and finding solutions when there might first appear not to be one. So that’ll be the first question I’ll be asking you about – what experience have you got?” Lawrie said.
“But also try to avoid a one man band type of situation where someone’s trying to be open to everybody and doesn’t have the support of a team around them. Having a team enables me to focus and do the things that I do well, while I know that someone else in the team is looking after the things that I don’t do well, which is highly advantageous. And there are a lot of aspects to the job that I don’t think you can be fully across all of them.”
Property finance tip 5: Consider standalone loan structures
Investors can benefit greatly from standalone loan structures, rather than having one lender control the entire property portfolio.
“Ideally, if you’re going to the extreme of risk protection and maximising your capacity, each property would have its own separate loan without any ties to any other property or any other loan, and in some instances, where it’s appropriate, having each property have a different lender attached as well. So there’s not one lender who potentially has got control over the whole portfolio,” Bushy said.
“So while you’ve got the weigh the pros and cons, certainly that standalone structure then allows people to buy and sell properties at their will, not at the banks control. Because as we all know, if you want to trigger a change and buy or sell a property, then the bank will automatically revalue everything. And if bank value is being conservative at the time, or the market’s down, then suddenly you don’t have the equity to do what you want to do and you’re locked out. Whereas going standalone, you decide what what to do with the property and what you’re going to do with the loan. So it’s putting more control back in the hands of the property owner and the investor.”
Listen to the full interview here.
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