Paul Glossop: Good day and welcome again to Pure Property Investment one on one. I’m joined today by Scott Le Quesne. Scott, thanks for joining us mate. Scott is the principal at Aussie Home Loans in Paramatta and Rouse Hill. We wanted to talk a little bit and Scott you probably know more or know less qualified then anyone that I know of to speak about a couple of these aspects. Specifically, though, quite topical at the moment, one in particular that I get asked a lot in our business of Pure Property Investment is; fix versus variable and right now I guess the environments changing every other week but some of the pros and cons that are available to certain, both investors and owner occupiers and things, people need to start considering.

Scott Le Quesne: Yes, it’s a big question that we get asked a lot and traditionally our answer has been, well it’s like insurance. If you take a fix line generally you pay for it but you’re locking in that rate and you’re sure of what exactly it’s going to be. But generally, you’ve paid a bit of a premium for it. So, we talk about fixed like it being an insurance policy.

But now with the change of the environment of lending, we’re really speaking to people about saying lock in your yield. For an investor, if you’re fixing you can lock in your yield by knowing exactly where your rates are at and the other changing market with rates moving up, particularly on the interest only side of things on the variable loans, it really is a good thing for people to be locking in and locking away that yield.

Paul Glossop: Yes, for sure and I think there’s probably a word to the wise if your broker’s not talking to you about the options you’ve got available, give him a kick in the butt to start to talk about what they can do and what some of the options are available to you and how that’s going to reflect.

Scott Le Quesne: I guess one of the cons to fixing is having an understanding of what purpose you’ve got for that property. If you are going to do a renovation on that property and then you want to get some equity out of it, you’ve to got have a think about whether you’re going to fix, because whether that lender is going to lend you some extra money when you’re tapping back into that property.

So, if it’s a set-in figure property we’re generally saying to people, consider fixing with the way the rates are moving at the moment. But if you’ve got some plans for that property or it’s a potential flip property, obviously you don’t want to be fixing in. You need that flexibility of the variable to either refinance to a lender that will lend you the money to access the equity or if you’re going to sell it off, you obviously don’t want to be paying break costs on a fix line.

Paul Glossop: Very, very vital I think, the couple things that break cost aspect and understanding it goes back down, I mean I almost say the same thing to every single question that we ask or every single aspect of property investment that comes down to is; what’s your objective and if you don’t understand that, understand it before you fix a line, before you flip it over variable, before you do anything regarding that property.

Understand what your purpose is. Majority of the time your objectives and your purpose for that property are going to remain pretty consistent. So, understand those, once you understand them, speak to your broker to make sure you understand what’s available to you and how that’s going to reflect on the financial ramifications.

So, if you do want to contact Scott or anyone from his team, feel free to give him a call at the contact details at the bottom of your screen now and you can also contact us on the details at the bottom of the screen as well. So, thanks for joining us, cheers!

Paul Glossop: Welcome again guys to Pure Property investment one on one. I’m joined today by Scott Le Quesne. Scott, thanks for joining us mate. Scott is the principal of Aussie Home Loans Paramatta as well as Rouse Hill in the western suburbs of Sydney. We have had again, going on the topic a little bit more lately of how the banks and the credit environment in general starting to show some really genuine differences in rates for different products and interest only versus principle interest and interest versus fix versus variable.

One thing I think which is actually pretty consistent is not necessarily subject to the last six months of how the bank environment has changed. But probably more so investors treating property and also their mortgages as a business, is reviewing regularly your position, the interests you pay and is it the best structure, the best product and the best rate you can actually be on.

Scott Le Quesne: Yes, hugely important. Really important that everybody does a portfolio review. We think 12 monthly. It’s really important to have a look at your portfolio every 12 months. Things to look at is rate, rents that you are paying but on the rate side of things really “Where am I at with all the different rates that I’ve got?”. And it might not be necessarily to change some lenders it might be just having an understanding of what’s out there. Put some pressure on your existing lender and say “I know that Nabs offering X,Y,Z. What can you do?” I know that I can get a fix rate with ING for this. Put pressure on your existing lender. It is a bit of a hassle for people to refine it and particularly at the moment where lending’s got much tighter. If you’ve got a big portfolio, obviously it can be difficult now to refinance that portfolio.

But what you can do is that you can put pressure on your existing lender to say “I can save 50 points by moving the fact that I’m going to save $4000 to do it, I’m going to go through the hassle and I’m going to do it. And you put the pressure on them and hopefully you can get the result out of your existing lender to say “Okay, here’s a fixed rate” that’s going to get you in good stead.

Paul Glossop: Yes, absolutely. I think key to that for me is to sort of understanding; A—If you were to ask the question of you existing lender? The worst thing you can do is they say no. If you go the same thing with your broker ask them to go ask the question of your existing lender, if you understand or armed with information of what else out there and what’s available. Then understand the pros and cons because rates aren’t the only thing that you need focus on. It’s structures, it’s the facilities, it’s whether they have an offset and a whole gamut of other things that come with it.

But I think, again it comes down to your objectives your structure and your strategy and having your broker know those things before they actually go and recommend a product, is key. Because you know some brokers might not necessarily really understand exactly what you are trying to achieve. And they just say this the best product because either A—it’s easiest for me to put you in there or it might not necessarily be that complicated for me to switch it over. As opposed to knowing “I know what you want to achieve, I know cash flow is important or I know an offset is important or I know being able to have a redraw facility is important, here’s the best lenders we going to provide that for you.”

Scott Le Quesne: Certainly, those flexibilities you are looking for on your own occupied loan and you’ve got the most power at the moment on your own or your owner occupied portion of your loan. So, there’s real cash flow to be saved. If you put the pressure on banks to save on your own or occupied loan. They falling over themselves for unoccupied principle and interest loans. So really put the heat on your lender in regards to that facility and try and save some money on your portfolio from that you know that loan.

Paul Glossop: Yes, that non-deductible debt. So sage advice there guys. Again, as always if you do need to get in contact or is anything there that you thought it was worth asking the question, Scott and his team is always happy to answer a call and go through your position see if they can help or even just give some general advice. Likewise, on our side from a property front, feel free to give us a call if you do want to chat about anything property related. We always happy to chat and our details are at the bottom of the screen. Thanks again for joining us Scott and we will see you guys soon. Cheers!