“Banks are counting on consumers to fall asleep at the wheel and end up overpaying” - How you could save thousands by refinancing.

Have you considered switching home loan providers in order to save money? Are you looking to make your mortgage repayments more manageable? Wanting to take advantage of the record low interest rates currently on offer in Australia? Mortgage superstar guru, Nathan Walsh (CEO of Athena home loans) joins us to spill the beans on everything related to refinancing.
On average, Australians are saving $60,000 over the life of their loan by making the switch. Nathan shares the pro's and cons, as well as what to look out for if you're considering switching lenders.

The following is a transcript taken from episode 21 of the We Talk Cents podcast. The transcript is created by AI software so it might not be perfect.

Blaize Pengilly  00:09

Personal Finance budgeting cash flow and investing don't have to be scary words. The We Talk Cents podcast is here to help you learn more about money and take control of your personal finances.


Blaize Pengilly  00:26

We Talk Cents podcast is not a financial advisor. This podcast is made for entertainment and educational purposes only. All information shared is of a general nature and does not take into account your personal situation. You should consider whether the information is appropriate for your needs and where appropriate seek professional advice from a financial advisor


Dan Jovevski  00:45

for more information please check out wemoney.com au slash disclaimer. Hello and thank you for joining us for Episode 22. In We Talk Cents This is a podcast produced by WeMoney and we exist to bring you money news and know how so you can live the best financial life I'm dad yours and finance expert


Blaize Pengilly  01:03

and I'm blaze former payday to payday kinda gal but getting better. Now, today on We Talk Cents, we have a guest joining us to talk all things refinancing, what it is how you can do it. And so how some people are saving around $60,000 By doing so, so pretty, pretty remarkable amount there. But before we get into that, let's take a look at the news. If you don't care for the news, or you're tuning in from way ahead in the future, totally fine. skip ahead a few minutes to get to chat about refinancing.


Dan Jovevski  01:38

Then news headlines, what has been capturing your attention mobilize? It feels like a new phenomenon. That's something that we don't understand about what's going into the wonderful world of finance that's cropping up and new acronyms that are just spitting out left, right and center. And this phenomena of NF Ts or non fungible tokens which have completely taken the world by storm. It's basically a token that's on the blockchain that allows you to do something and claim ownership of something that's very, very unique. And I think the most popular case of NF T is jack Dorsey, the CEO of Twitter, who put up his first original tweet inside of NF T. And I think the current going or the current auction for this tweet is about $2.6 million. So anything that you can make unique, you can basically sell to other people, and they can claim ownership of that, which I think is really interesting.


Blaize Pengilly  02:34

This is insane. I saw this and I so it's a type of cryptocurrency where you get, if you own that NFT you have the ownership of a digital asset, like the first tweet, but then other people can still use it or see it for free on the web. So I don't really understand the point of it, if you can own something that everyone else can see and use anyway. And I could you know, you can download, I guess don't really understand the point of it. And you know what I think this is Dan, I think this is me being naive and ignorant again, and in 15 years time I'll go God, I wish I bought all those NF T's because now I'd have $50,000 in whatever is like, like what happened with Bitcoin on myself. So yeah, the NFT is huge news this week.


Dan Jovevski  03:20

It is and if anybody wants to get involved and understand a little bit more about NF T is the easiest way to get involved is to type in NF T's and Lindsay Lohan. And then you will be stuck for a license in 20 minutes exploring what Lindsay has done to the NF t space. Not a typical person that you think would be the poster child for NF T's. But her name has now been synonymously linked to unique pieces of artwork. I think there was also another there was a band called Kings of Leon, who also Yes, sold that six on five most popular song who also sold an album via NF t protocol. And I think they got like 6 million bucks in the first day, which is absolutely insane. So it could be a new way to think about, you know, ownership of property in digital assets that we haven't considered before. So yeah, I'm with you. Blaize. I'm gonna I'm gonna start scouring around for some speculative NF T's that might appreciate and value in the years to come.


Blaize Pengilly  04:17

Yeah, for sure. And moving along to another bit of news that I saw this week, I saw that the government announced an extinction of the wage subsidy subsidies for apprenticeships, and I think it was allowing another 70,000 places or apprenticeships to have their their wage supported by their employers. What are your thoughts?


Dan Jovevski  04:39

While those lows are I think it's a great initiative. I think the young people of today have been under represented before in the past and the ability for the government to subsidise these new positions. And if you recall, back in the early 2000s, there was a very similar scheme of the john Howard government which basically introduced this concept of formalising apprenticeships, for A lot of people and then also putting a lot of money and resources behind apprenticeship centres that young people could go to receive more information about particular trades. And there's a lot of formalised process and structure around apprenticeships, because prior to that apprenticeships are religiously driven by individuals. So if you're a carpenter, you would put an ad in. So your paper calling for apprentices? And then you would have to really yeah, you'd have to manually go through and trial all these people out and say, Yeah, what's your name? JOHN, who do you know, john, I know your uncle Peter, also come to site today, let's give you a crack. And that's what that's how apprenticeships sort of formed out. And that's how young people got to know, particular types of tradecraft. But now with this formalised structure, it allows younger people to go through a more restructured program, with the support of the government and these incentives actually beneficial to employers, to encourage them to have younger people join the businesses. So look, I think I'm excited by international boys. How about you?


Blaize Pengilly  06:03

That's cool. I didn't actually know that apprentice apprenticeships used to be like that. Um, look, I have mixed feelings because I do. Yes, I think it's great. And I do think it's providing opportunities, you know, particularly to young people, because it is, you know, people doing apprenticeships tend to be the younger generations, and they've been the hardest hit during COVID. But in saying that, I feel like, you know, maybe males or male identifying people might have it a little bit better, because there seem to be a lot more men in trades and there seem to be women in trades. So I'm kind of like yes, it's a good thing. Yes, you helping out younger people, but like, Is it really balanced? Like are you giving enough support to to younger women starting out? Or you know, I don't know. I guess think that you know, the gender gap might not have been addressed in this game, but I don't know the stats. I don't know the stats on the gender that how the genders are split through the apprenticeships, but that that's my first first thought and, and reaction, but it is it is good that they're doing something. So yeah, mixed mixed feelings for me on that one.


Dan Jovevski  07:11

Yeah, I've seen plays, I get the sense that I'd be really interested to explore and uncover that. But yeah, I think that's that's also a really interesting thing is making more people more included inside the economy. So that's a really great point.


Dan Jovevski  07:29

So full disclosure before kick things off, we might be the producer. This podcast is affiliated with Athena and Nathan Walsh, our guest today, who is the CEO of Athena has a direct commercial relationship with WeMoney. We hope you enjoyed the show.


Blaize Pengilly  07:44

Dan, you know, I love my pop quizzes. Oh yes, I'm ready for one today. Please. cast your mind back. The year is 2005. There is a very famous actor who's turned into a musician and released a hit hip hop or rap single. Who was the actor and what was the single titled


Dan Jovevski  08:08

Mark Wahlberg?


Blaize Pengilly  08:10

I don't even know who that is.


Dan Jovevski  08:13

is an old school rapper from way back but I'm not sure if he did it. He doesn't have five My mind is escaping me because that was the end of high school for me so that tune doesn't doesn't come to mind. I was a bit of a boy but was it?


Blaize Pengilly  08:24

It was obviously Will Smith sweet


Dan Jovevski  08:33

Blaize I trust you to come up with that. Awesome, awesome analogy. awesome song. Yeah,


Blaize Pengilly  08:39

it's it's still it's still a banger. I still love it. I am mentioning Will Smith switch because we are talking about switching or refinancing today, which is a really fantastic way people can save money. Here to join us and talk all about it is a FinTech entrepreneur with over 20 years of experience in the financial services, consulting and legal practice industries. He is passionate about establishing and evolving innovative businesses that leverage the power of technology to provide enriching and customer experiences. With a background in banking at NAB and Citigroup. He also founded NAB trade nubs digital investing platform inspired by the broken mortgage system. He is now on a mission to reinvent the home loan model in Australia. He joins us now from Sydney, Australia. Welcome the CEO and co founder of Athena home loans it's Nathan Walsh. Welcome, Nathan.


Nathan Walsh  09:30

Great. Great to be here. It's quite a mouthful, wasn't it?


Blaize Pengilly  09:35

You've got such an impressive past, I needed to stop and take a breath in the middle of that. Nathan, have you heard of or danced to the to the switch track? Is that one of your goatees?


Nathan Walsh  09:44

It's amazing how my kids are sort of going back and looking at some of the old Will Smith. TV shows. So yeah, certainly featuring a little bit at household at the moment.


Blaize Pengilly  09:55

Awesome. Nathan. So we want to talk about switching today and refinancing and You have so much experience, especially around the area of home loans and mortgages. So can you give us a brief overview, what exactly is refinancing? And what benefit can be gained from doing?


Nathan Walsh  10:14

So, um, maybe just starting from the beginning, I mean, refinance simply means moving your home loan from one lender to another. So you're taking out a new loan, and paying off the old one. And so you know, when you buy a property, you typically taking a home loan out for 25 or 30 years, but very few people actually stick with the home loan for that long, there's sort of reasons why they want to get a better deal consolidate debt, unlike equity, so lots of different reasons there. And maybe just sort of starts with the barbecue test, you know, people are, these are really happy to have a given vivianne, about real estate and talk about what's happening, you know, maybe go and see an auction, if it's happening down the road, from their, from their place, but actually, that it can get really awkward in the conversation, when you're talking about the rate you're actually paying on your home loan, rather than just the property. And the key thing that people kind of know is you can have, you know, borrow from the same place, you can have the same product, but end up paying is wildly wildly different rates. And so just that discomfort of well, in my painting March, why did the sweet deals, go to the new customers? What's with all those fees? And so sort of reminded back to, you know, one of those really classic internet memes where, you know, Albert Einstein once described compound interest as the eighth wonder of the world, when if I do that those who understand it earner, those who don't pay it. And I think that's one of those really big things that people can really underestimate the benefit of getting these better deal now, what seems like quite small differences in a percentage interest rate just compound into these huge differences when you're talking about a typical lion, that might be say, 400 $500,000, over over decades. And so banks are counting on consumers to fall asleep at the wheel and end up overpaying and really refinance is that is that moment to say, No, I'm gonna make sure that I'm getting the right, right, I'm going to make sure I've got a loan that meets my needs.


Blaize Pengilly  12:10

I suppose getting a home loan or taking out a mortgage is such a big thing. And moving house is such a hassle, that once you do it, you kind of like oh, put that away, forget about that. It's like a set and forget sort of thing. And, and you don't want to think about it again. And and what you mentioned about compound interest reminds me of when we had I think, was Justin Bell, Dory on the show, and he was talking about compound interest is how it's like sort of a snowball effect, like it just builds on itself and keeps building on itself as it rolls down the hill. So that can either build on itself in a really good way. And it can be interest you're earning, say, in investments, or it can be interest you're paying if you're not actually checking and making sure you're getting the best deal with your own banker, or best deal on the market.


Nathan Walsh  12:55

Yeah, that's exactly right. It's kind of almost not intuitive. Just what a big deal. It is, you know, a difference of even half a percent. And it will sit down with with borrowers all the time and not much half a percent. And then you sort of show them the math, but no, no, no, on your loan over the life of the loan, that's $50,000. And people going, Wow, I can't you know, and so this idea to say what feels like small numbers, when you're talking about percentages, when you actually play out exactly what you're saying around, what does that translate to? It just feels very, very, very counterintuitive. And that's really the benefit for a lender, right? So the absolutely right, it's a really tough thing to go through to buy a house, it's a bit of a pain code. By the time you're not just get the property sorted out and settle, settle all these other things, do their labours, people are exhausted by the end of it. And then they almost put it into this sort of pancake trauma moment, oh, I just don't want to go back and look at that again. And kind of forgetting that, of course, you don't need to move house to sort out the line, there's an option of just going in, and refinancing making sure the deal you've got is the right one. And that's a very different simple experience that many people remember, I mean, people have gone through these horrible paper based processes, real opportunity to kind of do that online and what ends up being short amounts of time translating into 10s of 1000s of dollars. And you sort of think about people who who drive to the next suburb to save a few cents on refilling the car. But they're missing an opportunity to save 10s of 1000s of dollars by just making making their money work harder and making sure that you're not overpaying the bank on your home loan. There's also nothing I'm just picturing the person's bio for the very first time they're going through that experience. They're going and seeing somebody to help them on this sort of journey. And there's, you know, the CC consider what you buy for this time. You've obviously got things like mortgage insurance, even pay for the rate may not be the same as all potential borrowers. Which leads me to my next question is how often do people refinance and how often should people refinance and consider switching their providers to a better right now? Great question, Dan. So it does vary a lot right? There are some people who are very, very disciplined and are, you know, taking a look, you know, every two, three years, but potentially, you know, the majority of borrowers are not in that category, they're actually leaving it for for much, much too long. And actually, if you ask people, what is the right on your mortgage today? Over half of borrowers don't know the answer that question. And actually, you know, again, a lot of lenders deliberately make that hard. It's almost a challenge how many clicks on a website until you actually say the right department when it's sort of, it's hidden away, because I just don't want you to see the bad news to say what you thought you've got this great way when you first started, isn't the right that you're on today. And so that's that's where we would sort of come into sight, it is really important just to keep a close eye on that we'll probably talk a little bit about the fact that there's a lot of loans that you're paying a loyalty tax, you know, that the longer you staying with that provider, the more expensive that it that it gets. So we would be in a mode to say, let's really make sure that the right is is the right one. And importantly, not just looking at the headline rate, actually looking at the comparison rate, as well. And again, that's a real trap for a lot of consumers, they, you know, I think the majority people I speak to simply don't know what that means even really experienced property investors. In many cases, you've got many properties, you say, what is the comparison rate mean? And you know, that sort of start mumbling and fudging and just this idea to say it's important not just to have like the headline, right, you can fake but it's actually the comparison, right? The true cost of credit that takes into account the fees and charges takes into account, is that rate going to go up later. And that's really the basis for when you're looking saying, am I getting a good deal. And unfortunately, the moment there's a lot of lenders out there claiming these really great rates, and the headline rate might even start with one. But then the comparison rate might be up at 3.6% or so when you take into account not just the interest rate, but the fees and charges, all these other things. These are expensive home loans, and people just don't realise that they're paying 10s of 1000s of dollars more than they should. So I think it's really important to be in that mode to say, you know, if you've, if you've got excess cash in your life, that's great. But for most of us, 10s of $1,000 is not something you want to be donating to bank, there's plenty of other better things to be doing with your life. And so just making sure that you've just got that that point to say, don't take your eye off the ball, because they're really counting on the fact that consumers are paying attention. And the fact that they can charge way more than they should.


Dan Jovevski  17:31

Now that you've touched on two great Australian pastimes, the greatest dryer barbecue, and big bank bashing made Oh my God. And when combined, it's even more fun.


Nathan Walsh  17:43

Look, there's a reason for that. I just think the probably the talk about the keys over the last year or two was just just how far the RBA cash rate. So that official interest rate has changed. Because we look back two years ago, the RBA cash rate was one and a half percent. Right. Today, it's nought point 1%. So for borrowers that shouldn't be this great deal, I dropped the 1.4% in the cash rate that should have flowed through to the amount that you're actually paying on your mortgage. And when you sort of think about, again, for a typical loan 1.4% that translates into $120,000 lower interest cost that you're paying on that line, huge, huge benefit. But the real ugly truth is that not one of the 12 largest lenders in the country have actually passed on that to borrowers in full, right. So you know, for new signing rates for new investors. But when you're actually about the loyal customers who've been with that bank, they've actually kept a lot of adults should have gone to you this is all about helping people with going through a pretty nasty 2020 pandemic, all the rest of the money that should have ended up in your pocket. The banks ended up keeping that. And so, again, there's a reason why there's a lot of detractors out there a lot of people saying, I just don't think they're on my side, I just don't think they're wanting me to get ahead. And you know, you know, some real frustration out there. And hence, it's probably a topic that they probably should be a little bit more on the barbecue, not just to be dissatisfied. But like you know, it's time to do something about it. Just make sure that you aren't one of those people who had your pocket picked by people keeping on basically saving as you've gone through the year.


Blaize Pengilly  19:21

Oh my gosh, okay, I've got about four things I want to say and you're getting me really riled up you're right about the bank bashing Dan, because uh, Nathan, number one very frustrating that the banks make it put all that friction in to stop you from finding your rate to stop you from knowing whether or not you're paying too much that frustrates me. And to the second point for me is a confession. I didn't know what a comparison rate is. Thank you very much for explaining that. Nathan. It's interesting to know that, you know, I've seen it on all the advertisements, and I've seen it everywhere where loans that were loans are listed, but I didn't really know what it was. So comparison rate is the loan, the actual rate you're paying when you consider all the fees and charges Is that right?


Nathan Walsh  20:00

Yeah, that's right, the true cost of the loan. And I think the problem is a lot of people that might say, a comparison rate of, you know, two plus 2%. And sorry, headline rate of 2%, and a comparison rate of maybe three and go, Oh, well, it's lower than the comparison, right? They think it's the right you should use to compare to, but actually, you should use as the basis for comparison, when you're comparing rates, you compare the comparison rate. So if the rate is 3.6, as the comparison rate, that's way higher than other loans where the comparison rate must be must be much higher. And the simple kind of trick in a way is to say, where those rates are basically the same, the headline, right? The comparison right there nearly the same. That means you're working with someone who's got nothing to hide, where there's a big gap between the two. That's where they're trying to play games, right? It means they're telling you the writing is good, but in reality, they're kind of charging you a lot of stuff that they don't want to talk about, right? And so big gap that basically makes people playing games with you go where?


Blaize Pengilly  21:00

That's so okay. Thank you so much. That's so that's so frustrating, because that's what I thought the comparison, right was I was like, Well, you know, 1.99% that someone does or whatever it is, and then it's 3.47, or whatever in the comparison, you thinking, mentally you look at it without the knowledge and go, Wow, that's a really good rate. So that's incredible. The third point that I wanted to walk question I wanted to ask, is, you mentioned the cash rate, which is the reserve the Reserve Bank's rate? And you mentioned the change, does that mean that the cash rate is the amount that the banks are paying to borrow money? Can you just explain that? And how, because you said they didn't pass on the savings? And I'm just a little bit confused about that. So could you go into that a little bit more, please?


Nathan Walsh  21:46

Yeah, it is, it is a complicated topic. And there are actually a lot of different rates in the market in the market. So that maybe the simplest point is it is it gives you an indication about what the cost of money is. Now, it doesn't mean that for every lender, that's what they're actually paying, you know, frankly, like a bank will have different rates, they pay for deposits, and they'll have different different rates, where they're going and raising money offshore, etc. So there is a lot of variation about what the rate is. But in a sense, what the RBA is trying to do is manage the economy, it sets that cash rate as being in a sense, one of those key drivers. And so where there is a change, it's really an indication to say that's when you'd expect deposit rates to change and lending rates to change. But but but in a sense, is that correct? In this example, over that two year period, the RBA cut that cash rate by 1.4%. The question is, do you benefit by that much? How much is your loan come down over the last two years, right. And if you're sort of looking at going, Well, my Lamanna came down by half that amount. It's like, Whoa, that's 10s of 1000s. of dollars. The RBA wanted to be in your pocket to help, you know, keep the economy strong, to help people in people in jobs, that's what they're trying to do, right to protect the economy. And if the innocence, someone's going to give you all that, right, that's, that's, you know, that's really a sign that you're not getting the deal you should be.


Blaize Pengilly  23:07

That's the Old One for you, one for me, when you're, you know, doing a paper making a pizza or splitting some food out One for you, one for me, but the bank's doing it that they're benefiting.


Nathan Walsh  23:17

And the point being, that's not true, all that, you know, there's plenty of places you can go where you get you get that full benefit. And so, you know, you don't have to take that right, you don't have to take it. I think if we can deal with what are the practical ways that people can go about switching their mortgages over there, maybe you talk about some of the costs are involved in that sort of process and some of the fees that may be involved for borrowers as they go through that journey and navigating, switching for the very first time. Yeah, so you know, really, as you say, refinancing may not be free. And so really the two places you want to keep an eye on one, the cost of the cost of leaving your current lender. And then secondly, what are, if anything, the costs of your new new lender. And so when you're leaving your existing lender, there can be things like two strategies. In particular, if you're on a fixed rates line, you sort of locked into a period of time and that fixed rate period hasn't expired, there's quite likely to be a break fee if you're wanting to leave that. And that can be extensive. And often it does make sense to wait until the end of the fixed rate period, before you refinance. Unless the benefit in terms of the rates you're saving more than enough to offset that brightfield. So that's really the first one and then secondly, I mean, keep an eye not not all lenses are the same. They have application fees, and just you know, there's a bunch of other in the fine print. And so again, that really does come back to the point earlier around. Often the comparison rate will be a really good signal to say, look, there's there's some things to be wary of here, right. There's some other costs other than the actual headline interest rate that you're going to be charging. Now we'd be the first one to put up we believe that this should be a free ride. So you know, there are lenders out there, we've put a female on that lease saying, you know, there is no application fee, there's no ongoing fees, there's just none of that. And so real opportunity to work with lenders who don't, who not stinging you in the fine print like that. Absolutely, Nathan, and the company has been busy. I think I recall back in 2014, that sort of abolished and exit fees, which make the cost sort of easy for borrowers to go through. But in terms of the process of going through and switching your mortgage, so I've got my home loan, for the very first time I've gone through that initial journey, it's been maybe three or four years. Talk to us about some of the processes involved with refinance your mortgage, because you do have to get another valuation at some point to consider whether or not you actually can refinance and maybe not pay this other cost again, which is Lindsborg insurance, that would be awesome to get your your take on that. Yes, I think that's probably important to sort of think about where you only journey I mean, Dennis, you're sort of saying up front, many people start with first home buyer, they may have to borrow well about 80%. And then they've had the LM my insurance, etc, in place. But particularly if you're in a position where you've now had the property for a couple of years, you've paid off some of your loan, you've potentially had the benefit of your property. Now being worth more you can, you can be in a category where all of a sudden, that's not required anymore for the loan, there's an opportunity that your housing pay down your loan, you become for the from the lenders point of view, a lower risk borrower, and therefore, the opportunity to get a better deal than maybe what was available for you when you first bought the property. So really just being aware of those opportunities, as things progressed, there is a process where you are going to go through and have to put in a new application as a refinance component. So that is about understanding you as a borrower, understanding your finances, as you say that, the collateral and the wrist. But again, I think those are processes that can be so much easier than people may remember, as this has moved from being able to fill out a bunch of paper based forms, there's a lot of complexity, a lot of these online is much, much easier to be able to go through, for example, through a modern platform to be able to download the data directly from your bank account. So to populate all the financial ports, depending on the property that valuation can be an automated process. But clearly, for some particularly more expensive properties, there's probably a need to have a value of come and step through as well. So all of those steps along the way. But I think the point being people can underestimate the benefit, and simply not recognise that Yeah, so maybe it takes you a little bit of time in an evening to get the information together excellently putting it online can be very quick, once you've got yourself sorted out, then a few steps to upload a pay slip to organise that the value of coming in, check it out. But the payoff of accumulated the process might be a couple of hours work, you know, might be 50, or $60,000. Right? And so simply simply the point put the question is, you know, what's the hourly rate you're earning at work, right? And if you're someone who is earning, you know, 10 to $10,000, an hour or more, maybe that's not worth your time. But for the rest of this, that's a it's a pretty big payoff of just taking a little bit of a step, you know, just to organise a few of those components and make sure that you're, you're getting a better deal.


Blaize Pengilly  28:10

One of those jobs, we're doing $10,000 an hour because I'm about to pack up my desk and walk right out.


Nathan Walsh  28:17

Yeah, maybe that's Will Smith


Blaize Pengilly  28:19

Yeah, maybe maybe that's, that's my next thing. I've got to be an actor be international students. write my own speech song. That's my career. And you gave me a shout out. And I'm sure probably our listeners did as well, when you mentioned paperwork there, Nathan. But it's good to know that it's all it's all changing, especially with all the advancements of tech. And I want to know, so you can refinance home loans. Can you do this for other loans as well? Like personal loans or medical car loans?


Nathan Walsh  28:48

Yeah, look, of course, there's like, you know, real innovation happening in lots of different different sectors. So, you know, you know, California, we've really focused on the home lending sector, so probably best best position to talk to that, but absolutely lots of lots of providers out there really trying to make it easier, and we should not matter that is there to protect the borrower right? It is really there to make sure that this is a loan that's responsible to lend that this is something you can afford, that's not going to put you into hardship. You know, 2020 was a good example of not taking that for granted. So I think, you know, although it does feel like there are some steps that you're going through and make sure that the lender understands your financial position, understands the property, make sure it fits your goals. There is a little bit to do that. But a lot of that is is simply as regulation to make sure that everyone is acting in the borrower's interests, and this isn't going to be putting someone in that position. So I think, you know, that's the that is the context for that what is great is there has been a big focus on how do we lower that inertia and make it simpler. And so Dan, you referenced sort of the removing of exit fees, the things like open banking and other steps that have been done so that you can digitally provide a lot of that not have to go through the sort of paper pain that that process used to involve,


Blaize Pengilly  29:58

So Nathan, so people whenever if financing. Is it purely just for a better right? Or are there other reasons that people might want to refinance as well?


Nathan Walsh  30:06

Yeah, so there are, there are a bunch of different reasons. So I think right is always the most important and does tend to be. And I think that probably comes back to this idea around, you know, the loyalty tax. So people are systematically paying too much. And so loyalty taxes, the extra you pay for being loyal to your lender, right? It refers to the higher interest rates that existing home loan customers are paying relative to the deal that new customers can get. And so pretty strongly that that kind of price discrimination exists. And we should call it out, except for Athena homeloans. Price, every single lender in the country is actually charging that loyalty tax. And it's an average of half a percent in rape, which again, doesn't sound like a lot. But again, coming back to that compound interest, that translates into 10s of 1000s of dollars of excess interest, if you are sitting sitting in the background. So, you know, we would actually call out to say, there is systematically a really big, important reason to get to a better rate. That's exactly the point, guys, it's not the only reason. People do have reasons why they wanting to access equity in their loan, that might be things like they kind of get some, some work done on their property, there can be other factors around there, around their loan, other needs of goals that they have, you know, they might, for example, be in a fortunate position to have some excess cash for a period of time, maybe that's sold, some other assets, etc. And so again, having flexibility to have a redraw and offset facility, you know, I think it's really just making sure a home loan is originally written typically for 25 to 30 year period. But people's lives change in all sorts of ways during that period of time. And so, absolutely, it's making sure price fluctuate, but it is just understanding what are the other factors that are important to you, and make sure that this is a product that continues to meet your needs. And so, price being the big one, but but ultimately, you know, there are other factors that are there as well, I should kind of call out probably the really big one that people don't appreciate is just you become a better borrower over time. And so it's a little bit like, you know, your no claim bonus on your car insurance, right, if you don't go and crash the car, you become a better, a better, better risk for the joy over time. And it's exactly the same in terms of home loan, once you, you're paying that down over time. And hopefully, you've been in a position where you've built more equity. And it's not. So it's not just the loyalty problem, it's this idea to say, Well, I'm now a better borrower, I better risk, you know, if there was ever my insurance and other things, we had to do my first bit of property, but now a couple of years in, I'm in a position where I should be able to treat it as different risk in a different way. And so again, our brag is, as you pay down your loan, and Athena, then you automatically lowering your rate, we're passing on that benefit to you. But for other lenders, it's important, I think, just to keep an eye and just say, look, I am now in a position where I should be seen as being a bit better borrower here, let's just make sure that the lender has really given me a right that's appropriate for my circumstances. And so when you sort of think about, you know, a lender, so I borrow, he might have started out, you know, an 80% loan to value ratio. So that's the percentage the size of the loan relative to the value of the property. If you're just paying the minimum repayments, over four to five years, you'll be going from an 80%, it'll be out to a 70%. Even if you value the property hasn't gone up over that period of time. And so there is just by being a good borrower paying off the loan would net for you really in a position where you should be able to re-rate yourself as in terms of your risk and get yourself access to a better deal.


Dan Jovevski  33:37

Now this reminds me of the time when I used to work at the banks and having to go into people's living rooms at nighttime and drag on that printed paperwork of 30 pages and fill in all these forms. And I think the world has certainly moved on from from where we were, say 10 years ago. I'd love to learn more about your journey and starting Athena. And as a company, we money that's been in this industry and Blaize for people that don't know we're we're involved in another startup called SwitchMyLoan we were helping out borrowers in a very sort of similar context, many, many years ago. I think what you're doing now with Athena is is really unique in terms of every single pain point or problem that we ever think about in terms of money and borrowing from banks, you guys are attempting to solve I'd love to learn more about that from your core, sort of vision, mission and purpose and maybe what's also happening next at Athena, which which might sound exciting to our listeners. And before I before you ask the question I just really wanted to underscore something is that when we think about borrowing money from institutions, you know, when you go to a bank, you walk into the front bank office, you walk into the branch, you see the teller you see all the advertisements you see the billboards, us as customers with paying for all of those services. And that has to that money has to come from somewhere and it comes from us as consumers. I love For you to touch on that theme as well about the sort of extreme digitisation that's happening in financial services, and how theater is, is leading to that trend.


Nathan Walsh  35:08

Now, great, great question, Dan. And so, like you, I come from having worked at the big banks in here in Australia, and then offshore as well, and really saw the opportunity where Mike Starkey and my co founder, we're both We both are one of the big four banks. And, you know, this idea to say, Well, you know, having branches that people don't really want to go into cost money, having, you know, bankers coming in, I loved your comment about visiting someone's living room at night, that sounds kind of pretty spooky to me better than all of those costs, branches, bankers, overheads, with technology, you can make it so much cheaper and easier to do. And so that's really the starting point of saying, how do we simplify that experience? How do we make it a lot cheaper for us to run the mortgage business, and then we can pass on the benefits to consumers in terms of of their rates. So that very, very simple sort of Proposition which actually, from so many parts of these lives has already happened. But you know, mortgages for whatever reason, it's been this laggard, where you do feel the need to go in and go in and talk about effective because you just went given a lot of other good options. The other one is, only 3% of lines are actually originated online. So it is typically brokers and brokers and branches. And so just as opportunities that we'll have, how do we actually design these to be so much easier and more simple. And coming back to that point that there are so many families who are, you know, paying 10s of 1000s of dollars more than they should, and just being in that world of where, look for a lot of people, that's a really big deal, right? That's an argument with your spouse or having over money that's cannot really afford school fees or holiday or whatever, those things that are really important to you right APR people in good jobs. In Australia, it's an expensive place. And so we really feel that there's a really noble mission about both helping cut the rate, but also, helping Ozzy's pay off the home loan faster. So not just get the interest rate down, but actually arming people with a toolkit so that they can exit and not hit retirement where they're still got this mortgage, you know, hanging over their shoulder. So we actually launched out two years ago, last month, so it's, you know, we're written over $2 billion of, of home loans in that time. And I think the big one for us is actually really trying to challenge a whole bunch of the ways that the industry just thinks thinks things should be done. So, you know, we talked about the laws and tax and this idea that, you know, loyal customers are expected to pay more, we're, we're the only loyalty tax free lender in the country, you know, so we guarantee that we'll never charge our existing customers more than new customers on the light for lifeline. We talked about this idea that people become a better borrower as they've had on their home loan. And we've got this idea to say, as you pay down your home loan, we are going to lower the rate on your loan, automatically, you don't even have to call us that's just going to come through. And so again, what that translates into is save money. And people can therefore just find that extra $20 a month, you know, whatever works for you, just to put in those extra savings. And then benefit of compounding means that translates into years and 10s of 1000s of dollars in savings. And actually, the typical customer switching for big bank rates to Athena is saving $60,000 over the life of well, so really big, really big amounts of money involved. And so really simple proposition, right? You know, we're big believers in the great Australian dream, you know, how do we help all these own their home, but actually owner themselves, not the bank. And so we really believe there's a lot that we can do to use technology, redesign how these products work, and actually end up with, you know, much, much better outcomes. And importantly, just like the, you know, helping people with the home loan hacks, just the things that they can do to just be that little bit smarter, you know, the shorter the loan, the less you pay. And so there's a lot that we can actually do to really help guide people through that process. and achieve that achieve that dream of actually owning the home without the loan much faster.


Dan Jovevski  39:11

Nathan I also the for a practical perspective, for Athena, the one thing I really like, I'm actually in the process of considering my options for my own home. One thing I really like about the thinos process is that you have the ability to get a quote before you actually go on apply. So it takes all that sort of risk factor away from when you consider like Tiger or fire or Bangor, they're going to approve me, am I eligible and just waste all that time and effort and energy? If I'm if I'm understanding correctly, you can go to Athena, you can punch in all your details and it will tell you whether or not you're actually eligible to proceed to refinance. Is that correct?


Nathan Walsh  39:44

Yeah, that's fine. We're trying to be really clear about that upfront. You know, here's what Athena does qualify, we give you guidance very, very early in the process to be clear about that. And also, as you said, the right, the right is the right so go to that barbecue. When you talk to someone else with an Athena customer in their own home, they're going to be paying that the same way as you, right? It's not, it's not one of these, you've got to haggle and try to negotiate down from a really high standard variable rate. What we also do, and this is a new one for us down is, for those customers who do apply that don't meet the criteria for an Athena line, we have a service called Athena select, which will then actually help you if you put all this effort in to give us information about your finances and your goals that will actually find your home line that meets your needs. That gives you a better deal than the line you're on today.


Blaize Pengilly  40:32

Nathan, you have inspired me to chuck some wrestlers on the barbie this weekend and get chatting with my mates about their rates. I don't have a home loan myself but you know, it's you enlightened us enlightened me about switching and you know, the loyalty tax and compounding for the negative or for the positive and, and how to get more money in your back pocket. which is which is so awesome. Nathan, thank you so much for joining us. It was lovely to have you on the show. sexual pleasure We Talk Cents is very grateful that you joined us. If our listeners want to find out more about you or Athena home loans or refinancing, where should they go?


Nathan Walsh  41:11

athena.com.au. So real pleasure to be on the show that chat thinks about.


Blaize Pengilly  41:16

Thank you. See you later, Nathan.


Blaize Pengilly  41:23

What did you learn from from Nathan?


Dan Jovevski  41:27

Well, it's almost just thinking that we joked about to his favourite Australian pastimes. And I just thought to myself, why don't we just put the banks inside the barbecue and just be done with it? We might solve a lot of problems. I'm joking. Thanks. We love you. But I think Nathan really, really bought at home today in terms of the benefits of refinancing and giving us a top to bottom view of how you go about doing it. What are the potential issues? What are the costs and how you really get started? The thing that really caught my attention plasma kiddie your thoughts. His process of learning how to improve your finances is a journey with mortgages. And it doesn't start when you get your first timeline, you typically learn all these pain points when you go and refinance for the very first time and become more literate about that process. And that was a big eye opener for me. How about you?


Blaize Pengilly  42:15

The bit that blew my mind that it's one it was literally a lightbulb moment? And I'm like, how did I not think or consider or think have this in my brain before was that as you pay off your loan, you are a better customer. So you should be rewarded. Like why isn't it like car insurance? I thought when when Nathan mentioned that that really stuck with me. And yeah, I think it's really cool concept what they're doing with Athena in that the comparison rate is lower because you get rewarded with lower rates over time, rather than paying the loyalty tax where you're right either creeps up or you're not getting the best deal that your lender provides. So yeah, I thought that was really cool. If the whole industry could do a 180 and be turned on its head and take this new approach where as the longer you are a lender, the more you are rewarded, and same for like telco providers and health insurance. Why is it like car insurance that rewards you for being reliable? I think all of these industries could definitely take a lesson from that because that yeah, that that got me really excited. So yeah, that's that's what I learned.


Blaize Pengilly  43:25

We Talk Cents is produced by way money we money is a free Smart Money app for Australians. That gives you a total 360 view of your finances. If you'd like to give the app a go download it now. It's for free. And if you use the referral code 'podcast', you will get $5 on sign up


Dan Jovevski  43:43

Another feature that we have is that we might have community what have you seen this week that's caught your attention.


Blaize Pengilly  43:49

Okay, so taking a look at the WeMoney community this week. I'm actually so stoked with this. So the community features kind of like money Instagram within the app read a lot of people go and share money hints ways that they've made money saved money, ideas that you can do to do stuff at home like it's it's it's literally bargain Instagram, essentially. And someone posted their referral code for cash rewards, which is a an app you can use and you earn money back on your purchases, and I already use shop bag, but I haven't used cash rewards. So I signed up. And I made my first purchase and I signed up on the best day because I got $30 off my purchase. And then $20 cash back and then because I use that person's referral code, I got an extra $20 so I saved 30 and made $40 on my on my iPad. It was those I was buying those. So I was I knew I was about to come out. I'm preparing for Easter, I'm going on a camping trip and I thought heck if I can save money and get this delivered to my door and then make money off it, why not? So that was definitely my favourite thing I saw in the community this week. Did anything in the WeMoney community catch your eye Dan?


Dan Jovevski  45:10

Oh boy, just on the topic of cash back so I think we need to get one of these guys on from these cash back rewards program for the podcast. It'll let us know a little bit more because cash back now is taking off. And it's absolutely catching a lot of people's attention and the usage rates are going up. I think for me, the great thing that I've sort of seen this week, which actually bought the biggest will laugh, app and a service that is from Baker's delight, where you can use like this augmented reality, to like, deal with the Baker's like Baker's head on and things like that as an Instagram filter, and shout out to budget save, spend who had a real go and I just couldn't stop laughing when I saw that bike is a lot, not one of a company that you would ordinarily think about as being really hip and on install. But I feel like I have done a really good, really good job.


Blaize Pengilly  46:06

I saw that as well. And confession, being a bakery Babe, but was my first job 14 year old me that's how I was raking in my garden. It was like six that I was raking in my day. That's how that's what I was getting. If you also want to have a look around the WeMoney community, try the WeMoney app. It's free to download and free to use and I think you're really enjoying it.


Blaize Pengilly  46:38

Thank you for tuning in to We Talk Cents that we love having you join us on the show. So thank you so much for tuning in.


Dan Jovevski  46:44

If you want to learn more about WeMoney please go to the Apple App Store or the Google Play Store and enter the referral code podcast to get $5 on way money. And if you want to get in touch with us directly get us on Instagram @getwemoney and we'll be back again next week. Adios,


Blaize Pengilly  47:01

Adios. We'll see you later.


The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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