All Things Finance with Medici Mortgages
Purchasing a new property is exciting but can also be daunting, especially when it comes to getting the right mortgage and finding a specialist in the space that has your best interests at heart.
We recently reached out to Damian Medici of Medici Mortgages who has over 14 years of experience in banking and real estate to discuss the ins and outs of finance and the many other questions, hurdles and myths that come with lending.
Firstly Damian, tell us a bit about yourself and your objectives are at Medici Mortgages. Give us a bit of background on “your story” and the journey of how you have gotten to where you are today.
After working for a major bank as well as previously working in real estate, I found that a career in Mortgage Broking was the perfect complement to both industries that I was passionate about.
In 2013, I made the leap to start my own business as a Mortgage Broker and it soon became apparent that in order to become successful, I needed to swiftly engage prospective clients. I realised that the best way to do this was to engage those already searching for property – that’s when I fostered a relationship with a real estate company, who allowed me to work exclusively for them.
For a 12 month period, I was working two jobs, running off minimal sleep and continuing my hustle, to ensure that I was able to make ends meet and pay my mortgage.
Growing up, I wasn’t taught the basics of money: how to make it, invest it, let alone save it. Which is why I try so hard to help all of my clients gain a better understanding around money and mortgages. I acknowledge the mistakes that I made early on and don’t regret any due to the lessons learnt, however my aim is to help others avoid making unnecessary mistakes with their finances, and be confident with their money.
Medici Mortgages was set out to be a fresh way of guiding people through their home loan journey. Our aim is to change the way people look, think and feel about getting a mortgage. With our marketing, our approach is fun, energetic and educational. Our values are trust, transparency and service and we want our clients to share these values with us. We want to be there for as long as they have a mortgage and continue a relationship beyond their loan settlement.
You have a podcast and YouTube channel called “Money Grows on Trees”. What do you cover on these channels and how people can become members of the corresponding private Facebook group.
Money Grows On Trees was set out to help with our objectives – to help educate people around money and mortgages through sharing what I have learnt from my own experiences and through my experiences with various clients who have been both successful and unsuccessful financially. From general banking, to lending and even accounting, I feel as though I have quite an in depth knowledge and we thought a podcast would be another great way to expose that and reach more people through another medium and help spread our message in a more diverse and personal way.
To join our closed Facebook group, you simply need to request to join and you can join in on our community which we hope to build and create a place for people to ask me questions but also seek alternate perspectives from like-minded individuals.
From budgeting/saving, through to navigating the confusing world of finance/mortgage/bank terminology and maximising returns, would do you find most clients are struggling with?
Clients can come to us with either a solid plan of what they want or with nothing at all. We always alter our advice and recommendations based on what the client’s understanding is. The struggle(s) vary for each situation or client, it can depend on what our clients have previously been exposed to or what point they are currently at in life – not to mention throwing a pandemic and a whole lot of uncertainty in the mix. Regardless, we are there to assist clients on a case by case basis to achieve the best outcome for them.
The number of first home buyers getting into the market is approaching the highest level since 2009, accounting for nearly 40% of new home loans, well above the 10-year average of around 30%. Do you think Government grants/schemes have supported this an, should FHB be taking action now to take advantage of the current opportunities?
Yes! Mortgages are definitely on the rise for first home buyers. There have been a lot of great incentives to help them get into the market, although first home buyers are needing to purchase different types of properties, ie: move out to an area that is more affordable or buy something smaller inner area. There is great momentum with people wanting to buy their first home, and we are noticing younger adults wanting to purchase their first home sooner and it’s great.
However, I think it is important for first home buyers to understand what their goals are and work in line with that. You shouldn’t be buying something just BECAUSE there is an incentive, the incentive should help you get there ‘quicker’ but you shouldn’t just make a decision straight away because that incentive is there. You want to work in conjunction with whatever incentives are out there and ensure that they are in line with your goals.
As an example, if you have someone who wants to purchase a property in 3 months, and there is an incentive out there that ends in 3 months, then a conversation might need to be held about the potential benefits of bringing that goal forward, as opposed to someone who won’t be ready to purchase for another 2 years with that same incentive ending in 3 months, you would not want them to go around borrowing money only to try and gain from that incentive when they are not ready at all. So it is important to work in line with your goals, and those goals should be the biggest reason as to why you do things. Incentives should merely just help you get there quicker.
How often do you believe people should refinance their mortgages and why?
People should be looking at their home loans every 12 months and reviewing their finances on a regular basis. If they have a loan that hasn’t been reviewed, as a bare minimum, I would say review it every 2 years. At the moment we are finding that the average mortgage is around 5 years and that people will stick with the one lender which can often be too long. However, we are now finding that people are changing banks every 2-3 years due to the market being so competitive.
Pre Covid we weren’t seeing as many incentives from the banks, but now we are noticing banks are out there wanting to get business so it’s making clients want to take advantage of this and refinance a lot sooner.
Saving vs investing… what are your thoughts?
Investing always. We all know that the bank’s savings accounts are next to nothing. If you invest in a general ETF, you get anywhere from 6-10% per annum if you invest in a mutual fund or a mixed share portfolio. 100% investing.
With the current low interest rates, there is some speculation that major banks will increase their rates despite the RBA revealing that the cash rate is not expected to increase until 2023, at the earliest. What should people consider before fixing their interest rate?
At the moment, we are already noticing fixed rates going up, and variable rates coming down. Again, you need to work in line with your goals and if fixed rates work for you and they are going to meet your budget for the next 3,4 or 5 years, you need to ensure you will be able to commit to that but also be very conscious of when your fixed rate ends because that could go up if the variable rate is higher. We are definitely seeing rates increase from a fixed point of view and don’t think they will be lower than what they have been before, so it could very well be a good time to fix – IF it works for you.
What is a common mistake you find clients make?
The biggest mistake I see people make is just going directly to a bank. Now whether you are using a broker or not, it is important for you to have a chat with multiple lenders instead of only one. We all know that going through a broker can eliminate you having to go to each individual bank. We have a saying which is 40>1, because we have access to over 40 different lenders in one place as opposed to you going to one lender at a time, 40 different times. That is the biggest mistake I think people make.
Online shopping has definitely increased since lockdown and it’s easy to get consumed by some retail therapy to fill the time and get that dopamine hit… what are your recommendations to spend more mindfully?
Our attitude always has, and always will be; do what makes you happy. Now more than ever saving and spending money is equally as important. If you are saving a whole heap of money to buy a house, are you really happy? However, if you are spending money online every day… it might not be the right thing to do either. It is always important to find a good balance and reward yourself.
For example, if buying a coffee every day is something you enjoy, because you enjoy going out and seeing your local cafe staff and it puts a smile on your face, then that should be prioritised instead of saving $20 a week by drinking coffee at home. You need to do what makes you happy, but you also need to make sure you are not caught into the trap of ‘treating’ yourself too frequently where the reward is no longer a reward and you are overspending with an excuse of happiness that will ultimately not be achieved.
What are your thoughts on “Buy Now, Pay Later” offerings? How do these affect people’s borrowing capacity?
If you are using “Buy Now Pay Later Systems” frequently, they are considered a lifestyle or living expense, which then does affect your borrowing capacity. Using these systems on a regular basis can prompt lenders to ask you to close down your accounts or to pay off what you are owing as they will look at it similarly to a credit card. However, if used properly, we think Buy Now Pay Later systems can be a positive thing to use as they do reinforce positive repayment patterns, as you are ‘forced or fined’ to meet weekly, fortnightly or monthly repayments, getting you into the behaviour of meeting a repayment schedule.
What I like to suggest, which also helps you spend more mindfully, is to build up your own little ‘credit card’ of $1000 in a separate savings account. When you see something you like, you purchase it from this account, divide the total by 4 and then set up automatic transfers to pay yourself back what you have spent. As you are making it a little more difficult for yourself, and using money that has probably taken you a little longer to save, you will automatically think about your purchases and spending a lot more.
Are you seeing an increase in people Rentvesting? Explain what it is and what people should consider before taking the leap.
There has been a huge increase in rentvesting in the past year, and that is largely due to the huge increase in property prices that we have seen. Rentvesting is when you purchase a property where you can afford to buy, whilst renting a property in the area you want to live in that suits your lifestyle.
It is important for you to consider your goals and why you potentially want to rentvest. Have you spoken to a professional or have you just spoken to a friend who has told you it’s a good idea? Always speak to a professional about your goals. Work with a broker, work with a financial planner and property advisor and create your own team of finance experts to assist you in achieving your goals.
In 2019 you also were awarded The Equity One – Broker of the Year Award Productivity Award at the Australian Mortgage Awards. Tell us a little about this achievement.
In 2019 I was asked to apply for this award and I thought ‘why not, let’s give it a go’ as it was my first award I had been nominated for – and I won which was a great achievement. I think it was a testament to the growth that we had in our business over a 12 month period. I was so grateful to the team I had around with me and now that we have grown even more, I think it may be time to apply for another one! We have gone from 3 people to 8 and our volumes have doubled in 12 months.
For all of your finance and brokerage needs, don’t hesitate to reach out to the trusted team at Medici Mortgages and follow them on social media for some great tips and advice. Their specialised team is dedicated to finding you the perfect loan, not the lender.