Podcast: Special Guest: How Easy Is It To Get Money From Banks – Right Now? | Ep. 239

Posted by Ed McKnight on 11/05/20
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Show Notes

What's Covered in the Show?

In this episode, we are joined by Darcy Ungaro from Ungaro and Co and the NZ Everyday Investor Podcast to talk about whether it's easy or hard to get money from banks right now.

Darcy reveals that while banks are increasingly pushing mortgage applications through faster, lending institutions are still conservative – especially as incomes are reduced due to the Covid-19 shutdown.

If you are keen to listen to a recent NZ Everyday Investor Podcast episode with Andrew and Ed, then click here if you listen on Apple Podcasts, or here is you listen on Spotify.

Transcript

Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, I'm Darcy Ungaro, and today on the show we are joined by Darcy Ungaro from Ungaro and Co and the NZ Everyday Investor podcast.

Now, I know one of the biggest things that people are worried about as property investors is how to get finance from the bank. In fact, when we've done surveys on our website and through our webinars, we know about 40% of you will say that your number one issue is how do you get money out of the bank.

And that's why we've got Darcy on the show, because this is what he does every day as a mortgage broker and financial advisor. So, we're going to be talking about banking as of today, as of right now, and some of the stuff Darcy seeing both in terms of LVRs interest rates and bank conservatism as well. But just before we get into that,

Darcy, why don't you just give us 60 seconds on Ungaro and Co and the NZ Everyday Investor podcast.

Darcy Ungaro: So, I'm an authorised financial advisor. I have a small firm based in Auckland here, and I primarily work with people developing everyday financial plans effectively to help them with their home buying, whether it's their own home or its investment properties, help them with their insurance, help them with the KiwiSaver, but most importantly kind of just be there as a bit of a concierge as they go through a bit of a transitionary phase in their life financially. And that's my day job.

And then outside of that, I've got the NZ Everyday Investor, which I started about two years ago. I guess it's like the OG you know, podcast in this space, it seems, where we just cover things that are kind of not just property related, but you know, gold, Bitcoin, KiwiSaver, shares, indirect or direct. You name it, I'm open to it, because it's all about exploring the edges of what is, I guess, mainstream. It's all around the edges, so hopefully in the middle of that you, you get some context, then you kind of come out of it enriched or, or better equipped to develop wealth in your own world.

Andrew Nicol: Yeah, and not just from my own personal experience with Darcy's podcast. Sorry, I was invited onto Darcy's podcast about a year ago. It was in part, inspiration for what we now do today under the Property Academy podcast. So thanks asking for that. And it is an amazing podcast.

He does some really juicy podcasts, which are longer than this, where they delve into the different investment strategies other than property, which if you're investing in property, that's awesome, but it is important that you always diversify. It's important that you get information outside of what we give. So I'd highly recommend that one being a good property, good investment podcast to follow if you do enjoy podcasts.

Ed McKnight: Fantastic. Well, let's get into the banking as of today. Now, Darcy, what are you seeing with banks when you're trying to get lending from them? With the current applications you've got on the go. How are you finding the banks?

Darcy Ungaro: Putting aside the, all the business that we're still finalising that happened before the lockdown. Putting those ones aside and just talking specifically about new business that we're trying to get off the ground for people who are either buying their first home or they're buying their first investment property or they're upgrading their homes.

It is difficult to be blunt, and just because a lot of these regulations have been removed to make it easier for the banks to lend, it doesn't necessarily imply that the banks are keen to do that extra lending. They have less restrictions, but they still have their internal guidelines that they're following very religiously and in fact, applying a lot more conservatism to it.

So for example, if you are employed right now, they not only want to see confirmation of what your income is or has been, they want to make sure that you will be employed and that you will be employed full time. And that you don't see any reasons why that income will change. So it's not enough like say for example, you're self-employed is not enough to show historically what you've earned. You now have to somehow give them confidence that your income is secure going forward as well.

Andrew Nicol: And Darcy, I've actually seen from some banks that if your company or the company you're employed by has taken the grant from the government, they are looking at they're discounting your income because you've said that you're expecting a 30% drop for the month of March.

So any comment on that?

Darcy Ungaro: Yeah, exactly. So, and it's kind of common sense, right? Like if you were the bank, if you had the gold and you were making the rules, what would you do to, you know, actually satisfy your own concerns that you were going to get this money back with interest. Look at everything right. Including, you know, whether they got the wage subsidy. Because the fact that you've just made a declaration that your income is reduced to somebody over here.

So it follows that somebody over there, the bank actually will probably take that into consideration logically, right?

Andrew Nicol: And what if someone's been on a discounted salary at the moment? Are you seeing that banks are using the discounted rate for servicing or are they treating it as if it was a hundred percent once you get back to that.

Darcy Ungaro: It's part of an overall story. So if they can see that you're going to be at 100% at time of settlement on any new purchase, and they have some confidence around that and they look at your industry, by the way, and they look at the media to make sure that there's no redundancies being announced, then yeah.

Then it's actually business as usual. It's only when your income is at 80% and there's no plans for it to increase, or there's some uncertainty around that. Then they'll naturally have uncertainty as well.

Andrew Nicol: So if you're a pilot and a flight attendant you might not be getting a loan right now. Well, depending if you know.

Darcy Ungaro: Yeah, that's right. And it depends, I guess, on are you with the military or are you commercial, right? But yeah, you're right. And in isolation there's all sorts of little nuances with people's particular circumstances, which means that it's not a hard and fast rule, but yeah, it's kind of just logic rules in this space.

Ed McKnight: Fantastic. And in terms of the interest rates as well that you're saying Darcy, can you provide some comment about whether this is making it easier or harder for people to actually get lending?

Darcy Ungaro: Again, it's not so much about how cheap the money is, it's the availability of credit that's the issue. And you know, 3.05 for one year rate, that's pretty common right now, for example.

Whereas when you go to the bank and you're applying for a mortgage, they're going to be testing you at least 7% and you know, a principle and interest term, and they're going to be assuming expenses that aren't necessarily there right now. So, yeah, like the interest rates are kind of cause more people to come to the door, but the door is still very, very rusty.

Andrew Nicol: Darcy one question from me, what are the delays like with banks? Because I assume that a lot of people, held off doing deals during lockdown. Now, that we're easing out of that, I'm guessing that there's a lot of applications potentially coming in and being submitted to banks.

Are banks taking quite a long time to assess loans and also maybe going through them with a fine tooth comb and then conditions such as valuations, what are you finding those like for getting them done at the moment?

Darcy Ungaro: It's a good question because we've just had a case right now where it was actually surprisingly quick. So I'm surprised. And I think what the banks have done is they've partitioned their workforce to deal with, I guess crisis management, you know, mortgage deferral requests and interest only requests and all that sort of stuff.

And then their loan approval teams seem to actually have a bit of a lighter load because of decreased activity and they seem to be churning through the applications that we're submitting a lot quicker. So, you know, we're seeing probably two day turnaround times again, which we haven't seen for a long time. And yet they're coming back and they do have some extra conditions, like confirming that they don't believe there's going to be any material, change to their employment, and if valuation reports are required, that has been a little bit tricky.

It's getting a bit trickier now, sorry, it's getting a little bit easier now sorry. Where they are accepting valuation reports where the valuer effectively just does a drive by, I believe, and they do the report the best I can. So we've had one just like that recently. And from application to full approval, I think it took about five days and that included getting a valuation done.

Andrew Nicol: Wow, that's awesome. And so what sort of timeframe do you think is appropriate for people to have as a finance clause at the moment to make your job work?

Darcy Ungaro: Good question. Yeah, so I'd say still you want to be conservative, right? Because you just need to allow for those unexpected hiccups. Like seven working days would be kind of what I would say would be the minimum 10 working days would be kind of like best case on my wish list. That's what I always ask for. But yeah, that should be more than sufficient right now to kind of take into consideration a little curve ball that might get thrown to you along the way.

Andrew Nicol: Great, you'll be pleased to know we're telling clients to do 20 working days at the moment, so we're giving people like you heaps of time.

Darcy Ungaro: You guys are a dream. Keep it up.

Ed McKnight: And I think what this is really indicative of is it reminds me of an article I read by JB from Squirrel. It was talking about the centralisation of bank policies, whereas previously a bank manager would, it would be able to assess your application and be able to push it through, and there was a bit more of a relationship.

But now, as regulation increases and banks become more centralised, a lot of what the availability of credit is based on formulas and head office assessors making it harder to get that money out because you don't have somebody who can vouch for you, but hey, let's wrap it up there.

Please don't forget to rate review and subscribe to the podcast. It really does help us get the message out to more people and hey, if you're interested in learning more about property investment and actually investments of all types, then why not check out the NZ Everyday Investor podcast? I'll link to that in the show notes, so tap or swipe over that cover art, it'll take you right there or you can always search for it in wherever you listen to your podcasts.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, I'm Darcy Ungaro, and we'll be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.