Episode 155 | Trick to becoming mortgage free | Nicole Pedersen-McKinnon, Nicole’s Smart Money

Getting mortgage free how can you do it and what should you be doing to get there?
It’s everyone's dream to become mortgage free but how do you do it and when is having debt a good idea? Welcoming esteemed long-term money commentator and financial literacy  advocate Nicole Pedersen-McKinnon, Nicole is former editor of AFR’s Smart Investor Magazine  and has recently published her book How to Get Mortgage-Free Like Me which reveals how Australians are shaving years off their loan term and becoming debt free. In this episode Nicole gives the scoop on how she and her clients have become mortgage free, and how everyday Australian’s can also make this dream come true.

Here’s what we covered:

• Why do people get confused by what you own versus what you own?

• How to borrow safely?

• What are some tips on being frugal?

• What are the most powerful debt free enablers?

• At what age should people aim to become debt free?

• Should people put more money in super or paying down home?

• Should you pay down your investment properties?

• Why should people not be fearful of debt but using it more appropriately?

• Are the current sub 2% rates an opportunity or a trap?

RELEVANT EPISODES:
Episode 153 | Brendan Coates
Episode 131 | Jessica Fox
Episode 130 | Glen James

GUEST LINKS:
Website - NicolesSmartMoney.com
App - My Mortgage Freedom
Youtube - Nicole's Smart Money
Book - How to Get Mortgage Free Like Me
Book discount code 20% off - ELEPHANT

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in November, 2020.

Veronica Morgan: Who wouldn't like to be mortgage free. Are there really shortcuts to paying off your loan faster? That won't mean you need to live like a miser, what sacrifices are worth making in order to live debt free? And if you knew them, would you make them, do you even know anybody your own age, who is mortgage free?

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready. And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional. Don't forget that you can access the transcript for this episode on the website, as well as download our free fall or forecast report, which experts can you trust to get it right? The elephant in the room.com did I, you

Veronica Morgan: Today, we are talking to Nicole Peterson, McKinnon, not only is she mortgage-free, but she's met a lot of other people who have also paid off their homes. And we'd like to find out some of their secrets. Nicole is a long time money, commentator, financial literacy, campaigner, and educator. Her money insights have appeared in the Sydney morning, Herald sun Herald and the Sunday age for more than 15 years. And she was formerly the editor of the Australian financial review smart investor magazine. Now for the past six years, Nicole has also been delivering her smart money, start financial literacy program to graduating high school students and virus Nicole's smart money, YouTube channel more recently, she's released a new book called how to get mortgage free, like me in which real Aussies reveal, how they've accomplished the real Australian dream faster, smarter and cheaper. So thank you so much for joining us today to share some of the secrets. And I think you've got some elephants for us too, which are great to share. Nicole, thanks for coming along.

Nicole PM: Thank you so much for having me guys.

Chris Bates: I'll find a call. Thank you so much as well. I mean, I think most people are probably seeing your name around the traps. I guess my very long name before we go down the mortgage and debt-free is a really interesting topic, which we'll go down, but I mean, why is financial just So important to you and you've kind of dedicated your life to that space.

Nicole PM: Yeah, I have that. That's a very good way of putting it. Look it's it's life-changing so, you know, if you have security over your money and your finances, it allows you to live your best life. That's a life with options with free will, you know, it's it's to live where you want to work, where you want to do, where you want in terms of that work-life balance, as opposed to getting strong, armed into, you know, keep staying in a job that you don't enjoy. And because you need that, you have that requirement for that X amount of money. I mean, I mean, going straight in here one of the beautiful debt-free families who shared their very personal and private journey with me so that readers could, could replicate them in my book.

Nicole PM: He was a mechanic for probably 25 years. Absolutely hated being mechanic, hated it, hot work, it's hard work. And by that point in your career, it's very boring work as well. So pressured, et cetera, they got rid of their mortgage and he actually quit. His job, took on an apprenticeship as a builder, as a mature age, man loves what he's doing, but he could take that 20 grand pay cut because he didn't have a mortgage anymore. I think the man was just bursting out of his skin. When I met him at first, I thought it was making him nervous, but then I realized he was just so excited. I just couldn't wait to tell me that like his life had changed because all of a sudden he had this freedom and that's financial literacy. That's what I mean. They, they were super clever in the way they did it. And they executed this brilliant strategy, which is in my book and it works, it worked in, it changed everything for them.

Veronica Morgan: And we will get to, obviously some of those you know, I guess the bait, you know, some of those little tiddlers you're gonna give us so that we we're attempted to buy your book. Obviously we'll put the link in the show notes, but I think it's interesting that you're talking about the options and the freedom that come from being mortgage free and yet Guinness ideal in home buyer Academy. I deal with so many first home buyers and they're all dying to get into debt, you know? So it's interesting how you get you, you w we aspire to owning our own home and yet it can become a manacle. So, you know,

Nicole PM: That's right. And I mean, I mean, right now you're talking about the government massively relaxing lending standards because they want to stimulate the economy and get us out of this COVID economy. They want, they want the people to borrow with our ears pin back so that we can spend through this thing and like help them stop them from spending so much, because they've obviously put in so much already, but that's super difficult and super problematic and super dangerous because if people borrowed too much, then you're going to get over committed. You risk a debt spiral, and that's when it's very difficult to ever become.

Chris Bates: Mortgage-free you said that would options, which Veronica picked up on as well now, just because you live in a beautiful country. But then everyone's got the same Options every day. Everyone can, you know, work the same hours can work and earn the same money, can live in the same places, et cetera. And I guess what financial does financial literacy or financial empowerment et cetera, allows you to have more options and options. It can be a completely different life. You can live your neighborhood. We live in a completely different life to you. Difference. There is I guess, knowledge around finances, potentially.

Nicole PM: It is. And it's like, they're just there sort of tips and tracks, particularly when it comes to a mortgage that can make the difference, you know, of a hundred thousand dollars in terms of a hundred thousand dollars that you've thrown away in interest he didn't need to do, if you just knew how to work the system. So he just had a couple of little bits of knowledge. It makes an enormous difference to your mortgage. And of course the speed with which you get out of debt as well. So it is, it's so vital, it's a complex system we've built up, you know, unfortunately, but it doesn't take that much to kind of navigate it by the same token.

Veronica Morgan: Isn't it? Because, I mean, you're saying a hundred thousand, so you're saying that what, on an average mortgage over the line?

Nicole PM: Yes, yes. That's right. I mean there's yes. Yeah, absolutely. Yeah. And don't miss the fact as well. I mean, guess there's a motivating thing for listeners. Don't miss the fact that, you know, we had interest rates of of 8%, 10 years ago. So, you know, that was, that was like $900,000 to repair your average $400,000 mortgage. Whereas now that's dropped to like $600,000. So it is cheaper automatically because of the function of rates being at these super crazy record lows. So if you kind of mobilize and pay off your mortgage is now cheaper than it's ever going to be, you know, you're going to save so much money.

Chris Bates: Do you think we're getting smarter with money or I know you've been around the money world for some time. You know and so, I mean, what's your thoughts in terms of, you know, out there as a, as a general population, are we getting more shrewd, I guess, more savvy or are we even potentially going the other way? And you know, I guess the world sort of perpetuates that sort of spending, I guess,

Nicole PM: Interesting question. I would, I think there's a difference between the high school graduates and the people who sort of learn the, the expensive school of hard knocks kind of way. So I think probably people who are out and about already and have some experience are getting smarter with money. That's not to say that they don't succumb to the temptations of borrowing too much, because that's just really seductive. You know, if you don't have those tight lending restrictions in place that we have right now, then it is easy to go or do you know what that house is much nicer than that house? I'd much rather take on a hundred grand more debt. But then you've got the high school graduates who are becoming very despondent because of the still very high level of property prices. And they're sort of almost from it.

Nicole PM: I mean, there is financial literacy in schools like the financial literacy board and Paul Clitheroe heading that. And I work very closely with them and in fact, MC their their updates to department parliamentarians in Canberra they've been, they've been working for years to get financial literacy into school, even. So the kids who were coming out of the school Gates are just going, you know what, throwing their hands up in the air and going, we're never going to get ahead financially because we're starting so far behind. And the problem is that they're the targets of all of these FinTech kind of innovations as well. I mean, you could always get your pay early stuff out. Now, you've got this buy now pay later. So there are a lot of temptations that you need to know how to resist.

Chris Bates: That's a funny thing, because as soon as you leave school, I remember when I was earning 13,000 or something as a junior accountant, and I had a $10,000 credit covenant, and I was like, Oh, I want to see if I can increase this. I wasn't, I wasn't spending it, but I was just, I was playing the system to see what I could get up there. Just out of curiosity, I own $13,000 a year, and I've got a $10,000 credit card limit, which is not.

Nicole PM: So interesting. And look, that's what it used to be like. But then, you know, there's been 10 years of hard fought consumer protections in there, and just, they're frustrating if you want access to cash quickly, or you want that home loan, but they're there for a reason, you know, they're there to stop what we saw come out in the banking Royal commission, or the governor wants to throw those out at the moment. So there's, there's lobbying going on to just try and keep some, some sensible rules in there as well,

Veronica Morgan: Because you can imagine that, you know, people just throw their hands up in the air and say, well, look, you know, I'm never going to be able to afford a house. Why bother save, why I get what I can and just live life for today,

Nicole PM: That's it. And I'm thinking you kit, you get a year like we've had right there. We started with this fiery apocalypse, which was just terrifying. And then we went straight into the pandemic in March. And in terms of getting people to think longterm, why on earth Would you, you know, so, But, but it is just so life changing that people do need it to do it. And I think the other thing that all of that has highlighted is that security, you know, that the roof over your head being fully paid off is the very best way of protecting yourself. If you do lose a job or if things do go wrong. So there is a real important safety message there that people are getting,

Veronica Morgan: Obviously we're talking, being mortgage free, and we're assuming that's the family home or your home, if you're

Nicole PM: The first port of call. Absolutely.

Veronica Morgan: Yeah. I mean, do you, are you an advocate for not borrowing to invest?

Nicole PM: No, I know I'm an advocate for borrowing to invest. Absolutely. But you need to do it the right way and the smart way. So you need your home to be on a principal and interest basis and pay that baby off as quick as possible, because that is non-deductible, that's, non-taxable, that's doing nothing, but hold you back, that interest is throwing away money. It's donating it to LNB and it's okay though. Well, you still got that home to have your debt on an interest only basis because that frees up more money to throw at your home. But once you get rid of your home, I'm an advocate of paying off your investments as well, because there's nothing more beautiful in retirement then, you know, then, then a steady income stream. That's 100% yours

Chris Bates: Logical though, that when you get that let's say you don't get the, I mean, you could get the title data, we could get your mortgage at a hundred dollars and it's almost thing. Right. But what do you think when you get to that stage psychologically, how do things shift in terms of how you look at the world through obviously all your stories, like, I know you spoke about the mechanic there, but what are some, I guess, broad things that you think you start to look at the world differently?

Nicole PM: In, in every way to be honest, like I guess that was an example of jobs, but then you know, where you live could change. You. We've seen all this sort of remote working kind of ability come up because if they're the lock downs and people working from home, I mean, having no mortgage makes that even more feasible to do spending more time with your children. Like I interviewed this beautiful family where the man, he was he's crazy. Actually he saved a $300,000 deposit. He was working three jobs, you know, he was in, he was an engineer, he was doing some firefighter, but then he'd come back and he'd work back at the restaurant that he worked at all through university. And he bust, he was just, just obsessive about saving for a deposit. And then of course, once he finally committed to two property, he bought a duplex and he was obsessive about paying that down now because he did that when he met the woman of his dreams and they quickly after we're becoming parents here and he has to work part time and he can spend half of his week with his new baby because they live in a free house.

Nicole PM: Half of that duplex is completely free and the other half has that rent coming in. So, you know, just in terms of life and balance, it's, it's remarkable and he's watching his brother-in-law, you know, commute 20 hours a week. You know, do the nine hours when he gets there, come home, the kids are in bed. It's, you know, it's a completely different scenario or it can be a really beautiful thing.

Veronica Morgan: It's,uit, it's a very inspiring story. It reminds me sort of the flip side of that. I wonder if you've heard of the term financial anorexia? Oh no. So now I'm just plucked. This literally just became a memory is a memory from when we were filming the show,ulocation, location, location. And we, we had some people that saved up over many, many years. I think they have at $1.6 million, they were looking to buy home and it was, they didn't buy to my knowledge,uthat certainly didn't buy while we were filming with them. And it was something that the bras and all having these conversation around the concept of financial and anorexia, where, you know, is this more a Spacely financial dysmorphia where you look at your bank account, it doesn't feel like enough, you know, they'd saved all this money and then they couldn't spend it. Uand so sometimes I wonder if people have got this,usavers, you know, that that's a mindset to get out of that to actually become property owner could be quite difficult or, or potentially someone's has three jobs. How do they switch particular type of person to say, right. Well, that's it. Now, I'm going to go part time.

Nicole PM: And I'm fine with that with, without a doubt. And I think, you know, having that baby, it was life-changing for him because he's focus shifted from this, this like, Oh, unbelievably zealous you know, acquisition kind of, or, or money focused to this little man. So I guess the fact that he'd done that first step enabled the second step, so full credit to him for being able to go, do you know what it's enough now? Now I stop.

Veronica Morgan: Yeah, because that's the thing, it's enough. That's a really interesting concept, isn't it?

Nicole PM: Yeah, it is. It is. And that's yeah. I think I have that. I have that, like the level of relaxation I have having paid off my mortgage is extreme and I'm not obsessive about money anymore. And I was, I, 100% was like, I remember,uwe were living in the UK and we were sending money back all the time and we decided to get married and we, so we saved for six months. We didn't go out. We sort of really buckled down and did it cause that's what I'm like. And thankfully, you know, you can't just marry your funny Matt to go to marry your money match as well. Thankfully, my husband was like that as well. So he came here and we did, we did the wedding, came home, spent three months, traveling, went back to London and had four pounds left, like it completely worked. And that was the level of kind of planning and budgeting that I was at. But not like I'd have a mortgage I'm super relaxed about money compared with that person I was before.

Chris Bates: It's interesting. A lot of it comes from my financial beliefs, I guess, financial values. There's lots and lots of books that delve delve into sort of childhood and,

Nicole PM: Oh, you've hit the nail on the head. So my parents will hate me talking about this, but I've, I've said it publicly, already it's in the book. So my, my parents invested in a coffee shop way before coffee was cool. Would it be in the 1980s? And they went into debt to do it and it was, it went bad and they ended up with this debt for nothing. So my childhood was shaped by debt like that desk. And everything was about paying off that debt. And I remember the celebration that we did it and and of course money issues cause friction if they do. So I, you know, I was determined that I wasn't going to have debt when I had, by the time I had children. And that was my, that was my driving force and we didn't. So

Chris Bates: Yeah, and different cultures, like different backgrounds have different attitudes to money, I guess. And then some ingrained that in their children more than other cultures. And then if you have it and then different parents have different financial knowledge. So if you covered and got great understanding of investing or debt or mortgages, et cetera, then you try and pass that on to your

Chris Bates: Kids. And so that's it. That's absolutely right. Yeah. That new person you spoke about Veronica, the 1.6 and even the car, we said, the person said 300. We say those clients who've dreamy hard. But I always wonder if it's a compromise worth it through the, through their twenties on the other side, who potentially have holiday or holiday holiday. Yeah. Yeah. You know that people should be thinking, they're saying their twenties, let's say they want aspirations of home ownership. They think it's maybe unachievable, but still should pursue that. How do you think you manage the spend today versus say for tomorrow?

Nicole PM: So I always say it's moderation, not deprivation. And it's, you know, it's similar to, to health. Wealth has to be that same sort of goal setting mindset, but not to the detriment of your life every day. You've got to reward yourself along the way, because let's face it. You could die tomorrow, but you've got to make light life is the living money. If they're spending just not all at once. So you need to come up with this sort of slice and dice of your salary that works for you. And it's something that you can live with and maintain over the long term as well. So of course that our mantra at saving 10% for future you, I call it like, that's always something that you should do. And that's the really big stuff. So whether it's a mortgage first, whether it's extra into investment, you know, above and beyond the superannuation, that's always something that should be sort of untouchable. And then besides that you can split surplus in your budget between, you know, the now the spend now the spend later, because don't forget you, aren't getting to spend it just not all at once. Not before you get it. Oh, not before you get it. Absolutely. Yeah. I mean, all of these FinTech innovations that let you do that. I mean, Oh my God, it's horrifying. Yeah, of course. Because the costs you pay more, it's like, even if it's not technically interest, there is still some sort of fee for that, which means that your money doesn't go with that. So it's just not sensible, you know? Exactly.

Nicole PM: Yeah. It's a line. It's a Homer Simpson quote that I've always loved is that that's a problem for future Homer. Well, I don't ever be that guy, you know,

Veronica Morgan: With young children, food is a great proxy for teaching about money. So I spend my life saying to my little one, you know, you really want to eat all those biscuits because think of future, you, you know, think of future. DASSI, there'll be no biscuits left and generally go, we don't care about future does one. We'll eat them all and cry because they've run out. And the other one will say all of them for future Byron. So it's interesting that it is seems very hardwired in nature. Yes, that's it, it's, there's inherent biases in all of that stuff, which feed into how we deal with our money.

Chris Bates: Well, that's an interesting point because there's been research and behavioral biases extremely hard to connect with ourselves in the future. Our future self is, is basically saying that, you know, I'm thinking about myself in my forties, in my fifties, sixties, seventies, and I'm going to start, you know, do things today that will help me get there. Um how do you really get that connection to build that sort of life with what it's going to be worth paying down debt is actually going to be worth and you get that connection.

Nicole PM: With numbers because I just find it that's, that's what drives it home to people. So you can do your goal setting your, you know, your, you go board or whatever your target and you pictures and whatever else. That's fantastic. Of course, you know, in terms of holidays with debt, I find it's numbers because I mean, let's look at one of my top strategies to paying down because the book is about doing it. The G you know, the cheat ways, basically like, yes, you can throw extra money at your debt, which of course helps massively, but that's hard finding extra money is hard, particularly, probably right now for a little bit, but there are ways of doing it for free.

Nicole PM: Literally, if you know what you're doing. So, you know, right now we've got this massive differential between the big four mortgage rates, standard variable rate and the best quality, not cheap and cheerful quality loans in the market. So those that come with real offset accounts, which I'm sure we'll delve into a bit more later. So if you refinance the average $400,000 loan today, which tens of thousands of people are doing, because there's just this blow out into two and a half percent. In fact, so the, before charging four and a half percent on their standard variable rate, the cheapest ones are down at 2%. So that blow out on a $400,000 loan means that if you what's called up stumps, but still stumper, so move your mortgage, but don't move your repayment as it worked. Just keep it the same. So you're paying not 1 cent extra than you're used to paying.

Nicole PM: Now, that's actually going to save you $191,000 and get you out of debt seven years early. And that's on a $400,000 loan that the average line I would imagine is fair bit bigger than that. Well, the average is 400, but don't forget that's around the country. So you told me to lay and everything else. So, I mean, yeah, if you're looking at Sydney and Melbourne, then your potential savings are much bigger than that. So just making that one move and then committing to keep your payments the same. It's just ridiculous. Like your loan, your loan interest falls from $270,000 almost to $75,000 and you don't keep the excess. So I just, I think it's a no brainer to give that money away.

Chris Bates: That's a lot of holidays really blown that out though has happened over the last six years. So and you know, if you bought a house in say 2015, or you refinanced five years ago, you think things couldn't have moved that much. Yes. There has been this apathy, absolutely.

Nicole PM: The lax tax. So I call it, you know, it's, and that's what, that's what banks and all financial providers rely on. Like, you know, your, every utility and insurer wants you to just let that product slide, because they're going to progressively charge you more over time if the leach factor, you know.

Chris Bates: Hmm. Nice. They take advantage of obviously the existing customers, not justifying

Nicole PM: It's the strategy, you know, so, but, and that's why it's important to be vigilant about this stuff, but, you know, that's time consuming for people. If you do it on one thing, only do it on your mortgage. Cause it's $191,000 potentially. So if that's, life-changing, you know, it's a few extra years working on the average salary, right. Oh, right. Like it's retirement early, you know? Yeah, absolutely.

Veronica Morgan: Yes. I'm sold, so it's, I mean, you talk about borrowing safely as well because obviously, you know, there's so much money, well, low interest rates may make the potential borrow more. And obviously if the government gets this legislation through to relax lending requirements, et cetera, et cetera, and Australian dream is to buy a property. And then there's also lots of government incentives to try to do it. Absolutely. So yeah. What I mean, and you've got to structure it. We are always talking about structuring your loan properly, but borrowing safely, ER, it's hard. And I know myself with my clients, you know, certainly before 2016, I'd have a lot of clients come to me in, this are, well, the bank will lend me a million, but I don't want to borrow that much. I didn't want to borrow 800 or whatever. And nearly every client would come in saying that I'm shocked at how much the bank will lend me. And and then it flipped of course, because Linda, yeah.

Nicole PM: Then it became very difficult with the Netflix test and everything and it all the credit score issues, you know, but I mean, we're going to, we're going to return to what you described, where the banks are just going to offer people you know, outrageous amounts of money, which is going to be so tempting. I advocate like a two-step borrow would be where kind of sanity check on what you are offered. And one of those is I really advocated 20% deposit. That's not always possible, but there's just so much benefit to 20%. I mean, one is just the safety. If property prices do fall, you've got that equity buffer two is avoiding lenders, mortgage insurance which is, which is just astronomical. And the third one is if you can access cheaper interest rates and those cheaper interest rates, I mean, I just gave you the example that makes a world of difference to how much you pay overall. So 20%, if you, if you absolutely can is, is worth it, it's worth the wait. You know, there's probably no tearing hurry to get into property right now. You can wait and say, you know, and the other thing is that once you get that 20% deposit and figure out what that's going to cost you, what borrowing 80% is going to cost you stress, test that for say one or 2% in interest rate rises. You know, it's not going to happen soon because we're in this crazy globally,

Chris Bates: But it could happen over a 25 year loan term. And don't forget as well that, you know, if one of these get, if you don't have a baby and one of you is going to stay home to look after that baby, think about what your income is going to be and whether those potential mortgage repayments you're committing to of really put you in financial stress, which don't forget is defined as committing one third of your income to your mortgage. No more than that. No more than that. That's your feeling? It's interesting. So I have a concept of being a broker. These are conversations that we have every day with clients around what's too much, et cetera, that the 20% deposit, one's an interesting one. I think by saving lenders mortgage insurance is like an exponential curve. It gets gradually more expensive. The higher percentage that you borrow 80 to 88%, you know, it's it's probably doesn't really go up too much.

Chris Bates: I can sweaty go ideate, but once you get a ball and 88% less than a 12% deposit, it jumps quite a lot. And then at 90% it jumps a lot more after that. So we very rarely do that for less than a 10% deposit, but passing Sydney or house in Melbourne for someone to say that if 10%, a hundred thousand dollars, which that's right, would take them two or three years. That's right. And I mean, if, if property prices are on the move, then it's probably not worth doing that. Yeah. That's the kind of way. And that's why I say like, if at all feasible, but if you are talking, sitting in Melbourne, it's probably not Facebook. So you do need to probably tweak that. Well, that's an interesting point because it's been researched and behavioral biases out there that we find extremely hard to connect with ourselves in the future.

Chris Bates: Our future self is, is basically saying, you know, I'm thinking about myself in my forties and my fifties, sixties, seventies, and I'm going to start to show things to that will help me get there. How do you really get that connection to build that sort of life with what it's going to be worth? Especially the whole process of paying down debt is actually going to be worth it. And you get that connection is yeah. I mean that today, Oh, that's a great way of tricking yourself into it, you know, without too much discomfort to your brain or budget that's right. Well, you don't worry. You've got lots of buffer. Yes, absolutely.

Veronica Morgan: If you like what you're hearing here, please share this episode with others, you feel would benefit. And while you're at it, why not leave us an iTunes review five stars, please. Every review helps make it easier for other people to find us and hear what our amazing guests have to say. We love hearing your questions and we're planning more listener Q and a episodes. Please send your questions in. You can send them via the website, which is the elephant in the room.com today. You or directly via email to questions@theelephantintheroom.com.edu.

Chris Bates: No, I think your third one there around you know, I guess family, et cetera. It's definitely, I think the most thing, because that's Super stressful for young families, they go into it and then all of a sudden, one wants to family life changes. How do you actually do that? What's the best way of sort of figuring out that periods, making sure that you've got enough or.

Nicole PM: Lucky, you just have to think ahead. You know, you just have to, if you're buying a property, you need to be able to keep that property for seven years. And I would always advocate as well, not paying any extra into the mortgage, but paying all extra, every single dollar into offset accounts attached is that just, I mean, offset a cancer, a brilliant debt reduction technique, lovely little Ozzy invention, but also they give you that flexibility to turn it into an investment property. If life changes, you know, if you do need to move somewhere else, if you need to move out and move home with parents because you can't afford mortgage payments right now, if you need to get a tenant in there that makes that a fully tax deductible investment property, potentially for you, if life throws you a curve ball, or you decide to do something else that that income requirements falls.

Veronica Morgan: So it's just really, really powerful stuff to just keep those options open. And I think never buy a property for less than seven years anyway, you know, just keep those, that kind of time horizon in mind. And on that, I mean, okay, so then fixed and variable rates because of course fixed means other don't think. Or are there any banks that offer fixed rate with an offset?

Nicole PM: Look, there are some, they're normally substandard, it's becoming a little more common, but yeah, normally they're substandard. So, and that's one of the reasons that I only ever advocate 50% max rates because those offset accounts are just so powerful. So I just did a study last week. Actually, there are a couple of lenders out there because a lot of lenders are doing this scam really at the moment where they've massively cut six interest rates and they've not passed through the cuts on their variable rates. So it's, again that strategy where you get people through the door and you get them to stay beyond the fixed rate period because it life's busy and it's too hard to refinance your mortgage and they're leaping up some two and a half percent onto the variable rate. So I did a study where I sort of highlighted a couple of lenders that have like very low fixed rates and very low variable rates so that you can execute that 50, 50 split from day one. And you can get the best of both worlds with that offset account attached to the variable rate.

Veronica Morgan: So this is, I've always wondered because of course, when I, my first mortgage we've been talking a long time ago, fixed rate was always more than the variable risk, right. So, so you'd take it upon you take it upon the right is going to rise. But for the last, I don't know, decade, at least fixed rates have been less than variable. I've always wondered why. And so what you're hinting, if I've got it right, is that that's basically a marketing ploy to lock you in?

Nicole PM: Yes, that's right. Because I mean, not, not perhaps now, but we've got a buyers returning to the market and in particular first-time buyers the last eight, nine months or so you've only had refinancing really for lenders to try and capture yeah, they've, they've used this tactic of lowering their Spitz rates and that, that gets them, the headline figure, you know, the 1.9, 9% or whatever it is. But if you look at the comparison rates on that, you know, I like, for example, with the 1.9, 9% fix, I just said the comparison rate is 3.61. So that's how much the variable rate leaps up, which of course you're potentially paying for the next 20, 21 years, say after a four year fix or what have you, if you don't then keep nimble and keep moving

Veronica Morgan: Now, can you explain exactly what the comparison rate means and ease and is calculated because there's a lot of questions or what the hell does it mean?

Nicole PM: Absolutely. So the comparison rate is what you should be using to choose your mortgage, not the number that's up in lights because that number is not an accurate reflection of the actual cost of your mortgage. So the comparison rate takes into account all the fees that are loaded into the front of the mortgage and along the way. So all the annual fees on packaged products for example, will be factored into that. So with a package, you normally get a bit of a discount off the interest rate, but you do pay these chunky annual fees, which of course bring that discount right back. So it's the comparison rate, which is apples with apples. Now, as I say, normally, that catches just the impact of fees, but Veronica you're right because of the last decade where fixed rates have become so low. Now you're seeing these comparison rates that are really skewed by the high variable revert rate. So again, it's a really important tool to see, well, what's the actual overall cost of this loan and is it actually as good,

Veronica Morgan: But is there one number that a comparison like as in an amount of borrowing amount that's financed at that comparison rate is based on, because if you go to adding fees, they're not, they're not a percentage of the total borrowing, so how do they make it relative?

Nicole PM: And from memory, I think it's $150,000, and I think it's over a 15 year loan term.

Veronica Morgan: So it's $150,000 borrowing alone over a 15 year loan term because that's tiny

Chris Bates: Interest rates based on a 150 loan term, doesn't really matter too much. The problem with that comparison writes a great, because it allows people to understand that it's not just an interest rate that you're paying, you're paying fees on top of that. And some loans have higher fees than others. And if you had $150,000 loan, the comparison right. Would be perfect to look at the problem with comparison rates is that especially if you're talking capital cities, et cetera, people are borrowing a little more than 150,000, so the fees are fixed. And so the comparison rate would drop dramatically. That's a really good point. Yeah. That's a really good point. Yeah. Most banks, the fees are pretty similar. You know, you're talking about three, 400 a year for most package loans that every bank and so ultimately what you should be if you, especially if you're buying more than 150,000, is that the interest rate is what matters the discount off the standard variable, right? That sets the key number that will drive it because three 50 or four 50 on a package fee versus a cheaper, lower rate.

Nicole PM: And the revert interest rate, as well as, as we've been talking about. And that's look a really good argument for raising that, that comparison rate you know, default amount, because I think it was said a long time ago when it's become,

Veronica Morgan: It is interesting. And you've, you've mentioned this about people confusing, what you own versus what you owe. You know, if you're looking at keeping up with the Joneses, and this is something obviously in our society, that's a bit of an issue. And it has been obviously for decades, otherwise that saying wouldn't have done that. And I know myself, you know, you look around at people drawing flash cars. And, and certainly when I was a sales agent, you get vendors saying to me, Oh, isn't that great? All the BMWs and Audis had just turned up. This they're probably all on loans. And that means that they come order as much. And you know, maybe someone driving a Yarra actually might be able to afford your home better. It's not,

Nicole PM: Losery, you know, you've got to look around the school car park and go, you know what, they probably don't own any of those 1996 silica. I can guarantee it it's paid off.

Veronica Morgan: So, and this is the thing that, and certainly, you know, you use the barbecue talk around investors, Oh, you know, I've got six investment properties or whatever, you know, and this whole idea, and I've had clients come to me and say, Oh, I feel like a failure because I've only got one my own home. And I'm like, yeah. You know, when you comparing with the top line, your people go, I've got these properties, you don't know their debt structure. You don't actually know whether they're quality properties anyway, you, you absolutely do not know whether they own their own home. You don't Know where any of that stuff. And So why do you know, I guess, you know, you've interviewed all these people. How have they sort of got over that, that keeping up with the jones' ism?

Nicole PM: Well, I love the quote by a famous English actor, Quintin crisp, which is don't keep up with the Joneses, drag them down to your level. And I think that's, I think that's part of the kind of mentality of a lot of the people who've paid off their mortgages. You know, they've not looked out around them. They've looked at their own at their own house at their own issues. And just going, you know what? We want that security. We want that, that roof over our heads, that's going to make our lives the most relaxed that they could be. And they've really focused on that. Like to the exclusion of what anyone else is doing. You know, most of them have very, very run of the mill cars. I mean, everyone that I spoke to certainly takes holidays because that's your life is for living kind of rewards along the way, but they might not be the, you know, they might not go to Austria skiing for a month. They might do something that's more like caravan holiday around Queensland, which is perfect right now since, you know, everyone's trapped in their own state for the time being Oh, lots of us are anyway. So it's a matter of just finding that balance that works for you, I think. And it's, that's not going to come from looking at any external factors and any fancy car, you know, that you might see anywhere. You don't need it. Yeah.

Veronica Morgan: It's it is funny. I heard her saying, it's, don't compare your insides with somebody else's outsides.

Nicole PM: Yeah, yeah, absolutely. As you say, like, you know, you don't know what someone else's financial structure and it's very possible that a lot of the people that are, you know, have these shiny, fancy things, don't own them at all.

Chris Bates: You know, if you've got six properties and you know, they're doing well for yourself, you don't go around and start bragging about it and say, well, yeah, I used to be doing well financially, but probably the ones that are, I probably haven't got six, probably got four and they're probably no great properties in that ghetto barbecue. It could be a house of cards, you know, when vacancy might destroy the whole thing, like you just don't know what people, what people have committed to,

Veronica Morgan: But do they really have to go camping and never go skiing? This is a thing, isn't it?

Nicole PM: No. And, and again, it's, it's, it's moderation, not deprivation, you know, it's what works for you and what you value more because you know, if you, if you've costed in calendar, okay. So I have a free app that goes with my book and it automatically calculates your saving. If you up stamps and stump up shows, it's called my mortgage freedom date. And it literally shows you what date you could be, mortgage free. And there's a date slider. Say, if you want to be mortgage free by your 50th birthday, you can use that date slider to figure out what it would take to hit that goal. And that's incredibly motivating. And that once you know, that actual date, like I was talking about the number savings being motivating, once you actually know the potential freedom date as well, then that can be factored into every other decision you make with your money. You can weigh that. So, you know, if you go skiing in Austria, okay, that may be, it's going to push your debt freedom, date back six months and cost you an extra $10,000 in interest. But maybe it's worth it because there's a special, you know, celebration or something. And you just have to weigh those things up from a position of being informed of knowledge, eyes wide open. Oh, totally.

Chris Bates: Yeah. Whatever, if you set a date on it or a.

Nicole PM: Mortgage seems like a mountain, you know, it's the biggest debt anyone will ever have, but if you realize how much smaller you can make that mountain and how much more money you can keep for yourself and how much better life could be, then it becomes really, really tantalizing to target it.

Veronica Morgan: That's a cool idea. I like that too. I'm going to go and play with it.

Nicole PM: Yeah. Check it out. It's totally free. Read

Chris Bates: The book, which we'll do, but I mean, have you got parts in there where I'm putting my financial planning sort of background hat on that, putting more money into your super versus paying off your mortgage, because that is ultimately where a lot of people are at. They're like, well, I've got a job I'll be getting, you know, my superannuation guarantee is, you know, nine and a half percent, but I could put up to 25,000 in, should I put another five, 10 grand into my super fund or powerful mortgage will be kind of done on that

Nicole PM: There a little on that. And of course, mathematically, it's better to put money into your superannuation because you get it pre tax and you only lose the 15% super contributions tax. And there's, it's a tax privileged environment as well. So that's radically the numbers fall in favor of super,

Veronica Morgan: There's also the interest because like, if you put off your home loan and you're getting what you're paying 2% interest and if your super is returning

Nicole PM: That's right, exactly. So if you look at it on that pure numbers level, yes, super's very, very smart. But if you look at it from a security point of view and a freedom point of view, then the mortgage wins every time. So it's, again, one of those things that you have to decide the bright split for you, and that's really about your kind of own risk profile and investing temperament. It's not a one size fits all. Yeah.

Chris Bates: When they're in their twenties, thirties, they've just gone every single dollar they've saved Todd for into a deposit and to pay stamp Jewish. I may never have to do again, but anyway, we'll talk about that, but it's big mortgage. It's like, this is the danger zone I call it. It's like, you know, if anything happens in the next, you know, it's officially in the next 12 months, you know, they've got very, sometimes very little in the offset account. Cause they've had to use it for a deposit or pipe authorization. And so, yeah, and then there's potentially a life change with a family, you know, around the corner. And so that, that period they're like, it's, it's hard to justify, Oh, actually optimal for you right now is putting more money into your super fund because there's nothing in your offset account. Like if something goes wrong. And so once you've got that buffer and you start getting really ahead of the mortgage and you can save this sort mortgage, Freeman, freedom diet that you talk about that's where, you know, you've got to start to consider that more in super as an option, just because benefits of putting into super versus paying interest at 2%. That's if there's a better idea, but it's yeah. At different stages, it kind of

Nicole PM: Absolutely. And, and I mean, that's, that's compounding working in the other way. So when you borrow money, you get compounding at working against you. So you know that the quicker you pay off that loan, that the shorter it is, the less you'll pay in interest. Conversely, the earlier you start saving the long-term saving the less you have to actually save yourself. Like I tell the high school kids, you know, like flipping over to my investment hat now, rather my debt reduction hat, I tell the house, the high school kids, you know, you say $6 a day from now. And by the time you're 65, you'll be a millionaire. And it will only have questioned you $6 a day or $190 a month. So if you flip that to it to a 55 year old, they have to say five and a half thousand dollars a month, even a 45 year old has to save.

Nicole PM: I think it's nearly $2,000 a month. And, and what's really beautiful about that. What really brings home the value of compounding and that long, long tail of investing or saving is that that high school graduate has only had to stump up $100,000 of that million dollars because all the rest is compared to returns. It's simply time to earn returns on returns, on returns, on returns. It's just the time factor. So yeah, the savings you want to do for as long as possible, the debt you want to do for a shortest possible. And it's about coming up with a split, that's going to make that possible for you in terms of what you it's poetry, isn't it. Well, thanks. I might use that way, right. That a lot of people look at them too. Like, I know I'm constantly going start now, stop now. Stop because it's just so much cheaper. That's, that's the thing. And again, if you pay off your mortgage as quick as possible, it's just so much cheaper. So it just means you make more money and you save more money. So if you can execute those two things to perfection, then life is going to be amazing. Now

Veronica Morgan: I actually read an article somewhere that, that, you know, as if a baby, once the baby was born, a dollar a day was put away that ended up with a million dollars. So basically you've got that 17 or 18 years between when they're born and when

Nicole PM: Cool. It goes from $1 to $6. That's right. Yes. That's it. That was financially more attentive to 65.

Chris Bates: I'd probably only be 200,000, but not having a million dollars. I wasn't it this week where it's very I've been a little bit the debt conversation there probably been a little bit on your camp, Nicole, in terms of very, a bit risk averse around debt and wanting to pay the mortgage off. And I've had to sort of stop them by saying it gets a little bit tricky being a broker because yeah, they might be thinking, Oh, he wants me to take out more debt. So he gets paid more and there is that concept. Yeah. Which is, which is a tough one for you to do with, you know, and, but in these situations both of them were trying to keep their mortgages down.

Chris Bates: Which makes sense. But both of them were moving to suburbs and areas and types of properties that ultimately they didn't want to live in long-term. And so they weren't kind of yeah. Moved. Yeah. And so yes, on the one side they could say, we've only got two items, there's no mortgage, but when they have to wake up each morning and they walk out the door and then they have to commute to work their friends are closer to the city and their family won't be further away from their family. How do you, how does the happiness a home and potentially a bit more debt play into the other alternative is taking out lower debt. Just so you can pay it off.

Nicole PM: So I would say that the lifestyle factor of a property decision is more important than how fancy it is. And, and if you make those choices based on, you know, how convenient and good life is going to be in that particular property, then I think that's going to be the property. That's going to rise in value more anyway, because you can always improve a home. If it's in the right spot, you can always improve it down the track. You can always make sensible decisions to invest in that home without overcapitalizing kind of thing down the track, but if it's the wrong place, if it's in the wrong place, then that's going to be a potential difficulty for you in terms of the value of it. This is the main,

Chris Bates: That's pretty clever to be honest, because what you said is there, you said you know, focus on potentially getting in the right suburb and getting a house that's maybe not the everything property that you can add value to going to be a better investment, then potentially, you know, going a bit further out, spending a bit less, but then maybe getting a nice, shiny property.

Nicole PM: That's not going to grow in value as much. And that, you know, that lifestyle factor about being close to friends and things like that, like that's, you know, that's everything that stuff, cause it's not just about money. It's about enjoyment. Yeah.

Veronica Morgan: Cleared. I mean, one thing that you know, I've met many people over the years that have felt trapped because they made the wrong decision. And getting in and out of the wrong property is a very, very expensive. And you can have a small mortgage, you can be debt free, but then it can chew up a lot of wasted money and transaction costs.

Nicole PM: Oh, you don't want to flip a property. You want to flip properties as, as infrequently as possible because of that, that expense of it at the moment. But by the same token, I mean the stepping stone strategy is valid. If you buy that property in an area where it's a really good rental prospect. So it's worth looking at that in that initial decision as well, even though you might be buying your own home, because if he's paid off anything, extra into offset accounts, other than directly into the loan, then you could turn it into an investment property and then use that equity to get a home in a place that you do want. So if it's strategic, then that's kind of a different story. That's clever. And we did that. We bought with, with a view to changing that into an investment property, because it was never going to contain our growing family, the little two better that we bought to start off with. We also bought only half of that. So we went in with family and we did, we, you know, we hired lawyers, we got the co co ownership agreements and we paid 50% of the market rent to my sister-in-law, who owned 50% of it. And then we paid off as fast as we could, the 50% that we owned. So it just meant that we didn't have to have that huge straight away, which psychologically makes it seem much more achievable to pay off. There's, there's a big benefit in that.

Veronica Morgan: Yeah. There's definitely ways that people can get in. And like you say, it's strategic and it's about knowing at the outset, what your plan is so that you start sharing everything right. In the first place and by the right type of asset in the first place as well.

Nicole PM: And if you're, if you're kind of newlyweds who might want kids down the track and that's the very crucial consideration

Veronica Morgan: Now, I think it leads into what I suspect your Dumbo is going to be for us.

Nicole PM: Yeah. I think I let him give it away. But yeah, I mean, I actually had a friend come to me recently and go, I've just read your book. She goes, I've made the most massive mistake and that's why people should read it before they get their home really. But I'm, of course, they're not super interested until they get the debt, the news around their neck and they go, Oh, how do I get rid of this? Which is also, you know, a good time to read it, but you got to structure it right. And get the right loan to start with. So what she did was she paid off her home into its loan, which makes perfect, intuitive sense. It's, you know, it's the great Australian dream to actually own that home rather than just have one it's what you would logically do. But unfortunately it's, it's fraught with danger for one thing, because we saw during the beginning of COVID that me bank recalculated people's redraw, borrowings, and sucked up a lot of that additional money into the loan itself.

Nicole PM: So it disappeared. It so redraw and that's, that's not unprecedented that's happened before CBA has done that. Other institutions have done that. And it's absolutely allowed in the loan terms and conditions because you owe each chunk of money to your lender. So if you've got extra money sitting in it's loan and you get into trouble or they make the calculation mistake, which I suspect is what happened in the bank's case note, that they did reverse that because they just came into so much flack and hold up before a parliamentary inquiry for it. But if you pay extra into there and you know, there's potential that you're not going to be able to keep meeting your repayments going forward, then the bank can totally freeze those extra repayments. You have it a lot more than that. But the other crucial reason as well is that flexibility to turn the place into an investment property.

Nicole PM: And my friend had paid it off. She was so proud of herself. And then she went, Oh my God, I have to live in it or sell it. And it was a great company. It would have been a fantastic little rental. So that is the number one Dumbo when it comes to property and look at, you know, pay it off into the offset, no matter what you want to do, because you don't know what's going to happen down the track. You might want to, you know, if the world returns to normal, you might take a job overseas. Anything could happen. That means that you want to keep that as your kind of investment, but new somewhere else with your principal place of residence. So

Veronica Morgan: It's all about flexibility and

Nicole PM: Options. And even if you need that cash later on, you know, if something goes wrong, that's a great place to stash your, your what I call what I call the Holy fund, preferably six months salary, because happens. Right. I love that. So few places where you can sweat

Veronica Morgan: One of the title of my book. So, you know, I love it, love it.

Nicole PM: Yeah. So, so keeping every dollar of cash that you can in those offsets is going to save you massive amount of money, you know, on that average loan that we've been talking about, that $400,000 line, if you can keep $30,000 of money against that loan in an offset account for its whole loan term, that's going to actually save you $66,000 in interest and cut two and a half years off your loan. So offsets are just massively powerful. Every dollar that you have to your name, you know, school fees, savings for holidays, everything should go in there. That emergency fund. I said, if you use the offset on steroid strategy, as I call it, which is actually put all your expenses on a credit card for the month with a long interest rate period. So you've got $10,000 of income. That means that you can sit on your in your offset account in a specially designated offset account, because you can usually hook up to say even 10 against alarms. So your money's not getting mixed up. It's all very clear and manageable. That's going to save you an extra $19,000. So your interest saving goes to $85,000 and you last three years of your life. And again, completely free

Veronica Morgan: Because so you can actually set up more than one offset loan offset account against the law.

Nicole PM: Yes you can. And you give them, you give them specific names. Like, you know, one that was on Bubba booty when we got, when we got pregnant. And so that, that was the baby saving fund. And then there's like the holiday fund and the school fee fund and the emergency, the Holy and all that. Money's there. It's,uit's very clear. It's very manageable, lovely loan interest. That's a good tip.

Chris Bates: Sometimes we put by multiple offsets. So clients, some banks they've got better technology than others and extra offset accounts is and not met you know, joined to the bank and they'll only let you have one or two and we'll let you have seven, you know? Yeah, yeah, yeah. The thing I think we, you definitely, it's good to have more than one because you know, ideally if you, and I sometimes think that everyone should have their day-to-day banking at a different bank to where their home loan is because the mortgage everyday psychological.

Chris Bates: But if you say you got a hundred thousand dollars in your offset account, you don't want to be going getting a hundred dollars out of the bank cash if you people do that anymore and say to a hundred thousand dollars, because it gives you this appetite to spend. Whereas if you have a second offset account and then maybe has $3,000 in it you're not associating your spending to a hundred thousand. That's really interesting. Yeah. We certainly have a bills offset account, which is much smaller. So, I mean, you said right back at the beginning, you can get a you can get the title to your house. I don't have the title to my house and it's 100% repaid, but that loan is ongoing so that if we needed to execute another life flip left, we left Sydney

Nicole PM: Eight years ago and moved to the sunshine coast. And, you know, there was no bridging finance. There was no need to sell that place before we bought this place. There was no timing issues because that offset account was packed. We just plucked it out, put it in the new house borrowed a little bit more filled that off that Canada account as well. And then off we went, you know, so it just gives you the ultimate flexibility.

Veronica Morgan: Well, that's a great tip to finish on and true change or see change. Thank you. It's delighted. It's a delightful place to be stuck right now. You're ahead of the curve. That's for sure. I know. I believe that

Chris Bates: Lots of great little tips there around the den. I think the interesting thing is just having thinking about it on a deeper level and what it means to you and what you're getting for your money up, when you're going to debt, what are you, is it worth it? Are you going to get benefit? You know, and sometimes that's going into more debt. For example, upgrade their home, you're selling costs. And ultimately then he happier in that potentially,

Nicole PM: Oh, look, what's, what's going to get you your best life. Is it, is it upsizing? Is it being debt free? You know, only you can make those decisions, but what's important is to have a plan and to figure out when that debt freedom day is and how much money you're going to save because of it.

Veronica Morgan: Nicole, are we going to include the link to your website in the show notes, which is Nicole smart, money.com and you've generously offered a discount of 20% off the book. You can get hard copy of that delivered to have to use the code elephant, but we'll put the link in the notes and thank you so much for that, Nicole. And I do believe some people are buying it for Christmas.

Nicole PM: Yeah, they are look at some it's really nice. I'm so heartened by all the parents actually, who were buying it for their adult children, their young adult children to sort of set them up either before they get a home loan or once they've just got line. It's really lovely. I'm inscribing all the copies so people can ask me to write whatever they want to their children as a Christmas present. And of course signed. Thank you. Take care guys. Bye.

Chris Bates: Okay. Thank you so much. We want to make you a bit of elephant rabbit and this week's elephant rider training is

Veronica Morgan: This whole conversation around mortgage and borrowing safely. And the dangers of having a mortgage well within a mortgage is rather interesting. Isn't it? Because there's a bit of a knife edge here because often what we say is that the borrow the, the risk isn't necessarily in the borrowing, it's the, what you buy with that borrowing. And there are times when, if you don't borrow enough, you're actually taking greater risk because of the type of asset that you buy. And, and Nicole did touch on that, but in this low interest rate environment, Chris, you know, what, what are the, some of the conversations you're having with clients at the moment?

Chris Bates: So I think it's two things. One it's a quality of the assets. It's not a great asset. That's not a great idea, so you can pay less debt, but you're not getting great assets. You're not getting the benefit of that debt. Suspending it, taking out a bit more debt to get a better quality asset. You'll get all the rewards. So that's the first thing I think about taking out a lot of, for a house in a location, or even for the wrong house for your lifestyle. It could be in a good area if it's dark or it's not on a great road, and it's not giving you the life that you want while you're paying a big mortgage and not getting the lifestyle benefits that, that, that mortgage facilitate. So I think that's never a good idea, but if you're taking out more debt to get a better quality property and it's going to give you the lifestyle benefits that you really want, ultimately you'll get that money back through the better investment returns.

Chris Bates: But the thing is with low interest rates at 2%, and the five-year fixed rate at the moment just about under 2% there's kind of like a herd problem here where if you're the one who pays a little bit conservative and say, well, I could borrow say 1.5, but I'm not going to go and buy a house at a million dollars. Well, if the rest of the population, the buyers out there kind of max out and push their borrowing capacities, the people who are paying a little bit more aggressive in this environment and taking on more debt will unfortunately be the ones that get the biggest reward. So you gotta be a little bit careful sort of you know, when are, if interest rates were 7%, everyone was apprehensive on taking out more debt than the market's not going to potentially rise, but if people start dying, what raised the 2% arm at auction? You know, it's only an extra a hundred thousand, then you'll start to see price rises, especially for the good properties. So I'd be a little bit careful being too conservative in this environment because, you know, low rates will encourage other people to be more aggressive.

Veronica Morgan: Yeah, it does. And, and in fact, I speaking to someone I knew recently they were potentially going to engage us to help them evaluate a property that they wanted that was going to auction. And you know, there's a lot of tactical things that need to be taken into account. Whether you make an offer prior, how you make that offer prior, what's the property worth? Is it a good property? You know, what your other alternatives are, how likely is that property going to come up again within your prospect, all those sorts of things that need to be discussed and thought through. And of course the husband put the kibosh on it because he just said, Oh, well, it doesn't really matter in this environment. Whoever's got the most amount of money is going to buy it anyway. And I'm like, Oh my God, two people have that attitude.

Veronica Morgan: And they go to borrow to the hilt and they go to auction. One of them is going to pay way too much. And because they, their focus has come away from how suitable is this property for us? How good is this property really? What's a reasonable premium. And, and it, you know, am I prepared to pay over what, what recent sales might indicate? You know, all of those sort of limiting and, and protection, you know, buffer that they're a buffer against, you know, just paying too much. Now all that just goes out the window because it, you know, his attitude is, well, you know, I can borrow this amount of money. Other people could borrow this amount of money. Whoever's, you know, basically got that bit more. Who's going to buy it. And I just thought, Oh dear that's that's.

Chris Bates: So you know, you basically, let's say your budget's 1.5, that's a massive thing you can borrow and you start shopping in a place at 1.3. And you start missing out because the market's moving. Yeah. All of a sudden you'd be a little bit patient. It's not worth that. And then all of a sudden you're back paying you 1.5. So yeah. And so very quickly, and most people in the suburbs, we've got very similar borrowing capacities, hence why they're in that suburb. And so all of a sudden everyone's capping out and that's what pushes the prices. And then those buyers at 1.5 have to go to a different suburb, et cetera. So yeah, and all you're going to need is a few months of decent sales for that FOMO to kick in. And arguably it's already kicking in within some suburbs. So I've seen it, I've seen it at auction and it's there's times to do it. There's times not to do it. And I think that that's, that's the thing that when market gets hot buyers get in this mode of you got to do it for everything. And that's where the danger lies. Yeah, exactly. Where you want to know ways to stop having to do that. Our strategies or techniques using buyers, agents, you know, getting access to it early, always sort of things, try to really use those rather than just going to auction. And it's a shame you got to pay the most.