Construction loans and money chats

Written By Matthew Carland

"The bank said no." Every builder has heard this from clients whose dreams hit financial reality.

 But what if we told you there are dozens of lenders beyond the big four banks, many offering better rates and specialised products for construction projects? We sat down with Sarah Zhou from Beyond Financial, who is Matt’s mortgage broker, to understand the different options you have in financing your build.

Understanding Your Financing Options

Sarah revealed something that surprised us: the sheer variety of banks operating beyond the household names. She mentioned there can be over 100 lenders to choose from, which sounds like a minefield to sift through for someone who doesn’t know what they’re doing. While most people instinctively walk into their local branch, lesser-known lenders often offer competitive rates and innovative products specifically designed for construction and renovation projects.

These specialised lenders understand building timelines, cash flow challenges, and the unique risks involved in construction financing. They're not trying to fit your project into a standard home loan template - they've designed products around how building actually works.

The Role of a Mortgage Broker

Choosing the right lender involves navigating interest rates, policies, and fine print to try and find the best deal.. Sarah's role is bridging the gap between your goals and suitable lenders, saving time while often securing better deals than going direct.

Construction loans add another layer of complexity. Unlike standard home loans, they release funds in stages aligned with project milestones, ensuring smooth cash flow throughout the build. Green loans offer another advantage, rewarding high-efficiency builds with more favourable terms. These products exist, but most people never hear about them.

Creative Financing Solutions

Sarah shared insights into flexible financing approaches that can turn seemingly impossible projects into feasible plans. Strategic use of family support, private lenders, or hybrid financing structures can bridge gaps that traditional lending can't fill.

The key is tailoring your approach to specific needs while laying out your financial picture clearly from the start. Engaging all necessary parties early in planning prevents delays and disappointments later in the process.

Spotlight on Renovations

Converting older homes into passive houses presents unique financing challenges. Banks struggle to appreciate the value of efficiency upgrades that aren't immediately visible. Sarah's expertise becomes crucial in presenting renovation projects to appraisers in ways that accurately reflect their true value.

With proper information provided to valuers, renovations that might appear cosmetic from the outside can yield significant valuation increases. The difference lies in how the project is presented and documented.

Building Trust in Your Financial Partners

Financing is deeply personal, requiring trust between all parties. Sarah's commitment to clients, even through major life events, demonstrates the importance of choosing brokers who see beyond numbers to understand the dreams and realities behind each project.

The right mortgage broker understands your ambitions and works to make them possible, whether you're planning new builds or major renovations.

Most people accept the first "no" they receive, not realising dozens of other options exist. Engaging experts early, exploring all available options, and ensuring your financing strategy matches your project ambitions can transform what seems impossible into an achievable reality.

The question isn't whether financing exists for your project - it's whether you're working with someone who knows where to find it.

If you’d like to submit a question for us to discuss on the podcast, reach out to us on Instagram.

LINKS:

Beyond Financial

Connect with us on Instagram:  @themindfulbuilderpod

Connect with Hamish:

Instagram:  @sanctumhomes

Website:   www.yoursanctum.com.au/

Connect with Matt: 

Instagram: @carlandconstructions

Website:  www.carlandconstructions.com/

  • [00:00:00] Matt: for reference, for Sarah is one of my clients. but you're also my mortgage broker And Beyond Financial is the, the company that you work for, which is yourself.

    [00:00:10] Hamish: Yes. 

    [00:00:11] Matt: so reason why we wanted to get you in today is I think money's a huge conversation of what we have in the way we build. Um, it's probably the one of the hot hottest topics we have and uh, especially with interest rates and all these other questions, like, we're not, like, this isn't financial advice.

    [00:00:25] Matt: Just f yi. Oh yeah. A massive disclaimer. Massive, yeah. Massive disc disclaimer. Massive disclaimer on this episode. Um, but we don't know enough about it. And I can say that, Sarah, with my house, there's so many things with green loans and construction loans that we just wanted to provide some information to people out there.

    [00:00:40] Matt: On, how 

    [00:00:41] Hamish: do you get money? 

    [00:00:42] Matt: yeah, how, how to get money. 'cause reality's building's expensive and you need it. Um, but Sarah also lives in a certified passive house. We might touch on that right at the end quickly. But my first question to you, Sarah, welcome. Uh,

    [00:00:56] Matt: we, so we're so professional. Uh, so many people keep it cash. [00:01:00] Yeah. So many people still default to walking into their local bank branch when seeking a home loan. And from your personal perspective, what are the disadvantages of this? 

    [00:01:09] Sarah: take it way back, right? Like, we have so many banks in, in Australia and people probably, majority of the people only know is the top four, which is your big four, right?

    [00:01:19] Sarah: Yeah. Which is your nab, your Westpac, your A NZ, and your CBA. Nothing wrong with them. Um, but what you don't know is that there's actually probably a hundred little banks out there. and home loans are regulated, um, compliance checked exactly the same way. And so it's worthwhile exploring all those other options, just like any purchase you ever make.

    [00:01:44] Sarah: Um, I see it as, you know, if if you're getting a mortgage, you should look the market. Um, and it's difficult for one person as a borrower to look at every single, um, bank in the market. Let's say there's a hundred, like, you're not gonna go to a hundred banks and go, Hey, what can [00:02:00] you do for me? how much can I borrow?

    [00:02:02] Sarah: What's your rate? What's your fees? Like, that's just really, really time, um, exhausting and, and probably mentally exhausting. So that's why people do that. They, they just go to what they know 

    [00:02:14] Matt: and they think they're getting a better rate though, 

    [00:02:15] Sarah: and they think that they're getting the best that they can because they think that, Hey, I'm a loyal customer, and.

    [00:02:21] Sarah: Um, you're gonna do right by me, it's the opportunity cost. What they're missing out on is all these other banks, like there's new banks starting up all the time, and when they do, they have promotions and they have offers, and so they're missing out on all these other options, um, that they could, it could put them in a better position.

    [00:02:39] Hamish: If a small bank just came onto the scene was offering these like, killer interest rates on their home loan, what happens if that bank folds? 

    [00:02:47] Sarah: I mean, we're going to like the big economy world and, you know, lots of, um, compliance and auditing and government regulations and things, but it takes a lot for a bank to fold.

    [00:02:58] Sarah: Um, okay. You know, so, [00:03:00] so. Thinking back for, you know, economic stability, the government will step in and do everything that can, you know, for a bank to, to fold like it, it's not like a normal business where, oh no, I'm not operating, I'll just fold. Like for a bank to fold. That's a, it's a really bad negative sign to become market a bank.

    [00:03:16] Matt: They also run it, aren't they like the one of the most profitable? 

    [00:03:20] Sarah: Um, yeah, well, yep. That you can say that, you know, they are very profitable. 

    [00:03:24] Matt: My favorite with interest rates at the moment is like when they go down, they take a month to yes. To introduce in your rate. But when they go up, they, it's, oh, it's next week.

    [00:03:32] Matt: Like tomorrow, it's tomorrow. 

    [00:03:33] Hamish: Like, personally, I want the bank that I am, got my home loan win to be profitable. Like, I want them to be profitable. 

    [00:03:41] Matt: yeah, but I think the misconception that people have is like, one, it's like, as you said, it's you doing all the work. There's so many, so many options out there, but there's just loans out there that no one knows about.

    [00:03:50] Matt: So, and we can use my, I'm happy to talk about my own loan, like Wherewith Australia Bank and we were able to get it. Was it 0.5? Percent off our loan because I was 

    [00:03:59] Sarah: probably more, you've [00:04:00] got the best rate out there at the mall. Yeah. 

    [00:04:01] Matt: So because I'm building a passive house. Yeah. Okay. So there with green loans are coming in, they're huge overseas, but I think most people aren't gonna know this 'cause Australia Bank don't have a branch, so you're gonna walk into your CVA and let's be honest, like they're not looking after you.

    [00:04:16] Matt: They just want your loan. 

    [00:04:17] Sarah: yes, like I don't wanna say bad things about any banks, you know, and all that, but, um, how a bank works is literally, um, they take someone's deposit, right? So you, if you have some money to put it into the bank account, they take that deposit and then they on lend that onto someone else.

    [00:04:35] Sarah: And then in between the interest margins, right? So you give me $50,000 to put in the bank account as a deposit. I pay you, let's say 3% interest rate. But then I use that money and I lend it out to someone else and I charge them 6% interest rate. So that margin difference, that's the, that's, that's what a bank does.

    [00:04:51] Sarah: That's how they make their money. Right. So if you think about that in the aspect of things that there is a business and they're [00:05:00] there to make a profit. So if you are going in there as a bank to, to um, borrow money, they're gonna try to charge you as high interest rate as possible because that's how they make their money.

    [00:05:10] Sarah: Yep. Right? And they're gonna try to give as low interest rate as possible to the depositors because that's, that's their spending, that's their expense. 

    [00:05:18] Matt: And the crazy thing to me is most people don't shop around every few years. They just sit with the one bank 'cause Oh, they've given me a good deal. They don't call up, get on the phone and be like, Hey, what can you do?

    [00:05:29] Matt: Can you better the rate? They're, the bank is not going to call you be like, Hey, hey Matt, we've got a better rate for you. Because they're cutting their own income. Yeah, yeah. If they 

    [00:05:35] Sarah: do that right? So, so you, you sort of, you wanna treat, um, your mortgage just as, the same as you treat your insurance policies or your telco, you know, who your mobile phone with or who.

    [00:05:49] Sarah: Health insurance with like, you wanna do your, your checks and reviews quite frequently. How 

    [00:05:54] Hamish: frequent? 

    [00:05:55] Sarah: Um, I usually tell, like, talk to my clients literally every six [00:06:00] months. Right. And go, 

    [00:06:00] Hamish: okay, 

    [00:06:01] Sarah: what's going on? How are you going, how do you feel about your loan? 

    [00:06:04] Matt: and she does, I can tell you she does by the way.

    [00:06:07] Matt: So, so 

    [00:06:07] Hamish: I've had, I've had my, so we, we recently moved from one house in Mordy to another. We we're coming up to two years and haven't reviewed that loan since. Like are you saying? I would 

    [00:06:15] Sarah: say, um, it, it's a good time to have a look. Generally speaking. Generally speaking, a home loan really only lasts for two years.

    [00:06:25] Sarah: In Australia, people will refinance 'cause you'll, you'll find a better, better rate. Right. Okay. Like a better, it'll put you in a better position. Not that, um, I'd rather 

    [00:06:33] Hamish: note down. 

    [00:06:35] Sarah: there is a better work there, right?

    [00:06:36] Sarah: And there's a bit of cost to it. But we wanna know that what you've got in is that, is that competitive in the market? And if we can find a better rate or better fees, or giving you more borrowing capacity that you want, um, is that gonna put you in a better position? And you weigh your, your pros and cons, right?

    [00:06:55] Sarah: Yeah. Um, the cost of doing it, is that going to, outweigh the [00:07:00] benefits then? Maybe let's stay for another six months. 

    [00:07:02] Hamish: Yeah. 

    [00:07:02] Sarah: But if it's gonna put you in a better position, get you what you want, and it clearly saves you some interest, then you know it, it doesn't take for only probably two weeks and you can get a new 

    [00:07:13] Matt: phone.

    [00:07:14] Matt: But what, oh, but what does a mortgage broker cost me? 

    [00:07:16] Sarah: Generally speaking in the overall market doesn't cost you a cent. There is no out-of-pocket cost to engage a mortgage broker. How a mortgage broker, um, gets paid is they work for you as the borrower. Just like, um, a a bank teller works for the bank.

    [00:07:31] Sarah: Um, the mortgage broker works for you as the borrower. Um, the job of a mortgage broker, to me anyway, is to go out there to talk to my clients and say, what is it that you want from your home loan? Mm. Cheap. And you micro, uh, yes. You know, generally 99% of the time, you know, lowest rates is always number one.

    [00:07:53] Sarah: Yeah. 

    [00:07:53] Hamish: Yeah. 

    [00:07:53] Sarah: You know, lowest rates, no fees. Um, you know, I, I want to have, um, online access. I [00:08:00] want to have my, um, access to, to my savings whenever I want. Um, you know, all these different, what I call goals and objectives. Um, on top of that you might go, actually I am looking for another $300,000 'cause I want to extend my home, or I wanna rebuild this and I'll do that.

    [00:08:18] Sarah: how do I even do that? How do you know where does that come from? So I gather all those bits of goals and objectives, um, and my job is to literally look in the entire market. I can give you the entire a hundred percent, you know, let's say there's a hundred banks out there and give you a hundred banks and what their responses are to what your needs are.

    [00:08:38] Sarah: But I'll rank them and I'll give you the top five because I'm not gonna give you a hundred options. Yeah. Because you're not. 

    [00:08:44] Hamish: And do, do you, do you do that all of that manually? Like, are you going through a hundred banks? Uh, no. Or you kind of had your finger on the pulse. Correct. So it's based off the information that I'm giving you, you are like, oh, you know what?

    [00:08:55] Hamish: These six banks over here are probably gonna be the best. Yeah. And they're, you're gonna rank them. 

    [00:08:58] Sarah: Yeah. So my [00:09:00] job is to know intimately how each bank works. You think you, you, you go to a bank and you think you're getting the same home loan, but you're not. They have, every bank has a different credit policy, different appetite, they'll issue interest rates based on their appetite, which is, you know, whether I want a construction loan or not.

    [00:09:17] Matt: let's, let's just, you've said a key word. Home loans. Can we differentiate between home loan and construction loan? 

    [00:09:22] Sarah: There, there is. No difference. Um, in that the, the underlying product is a home loan where a home loan is literally a mortgage against a property.

    [00:09:33] Sarah: Um, for you to do, you know, various purposes, right? So the various purposes might be you get a home loan to buy a property, you know, you get a home loan to refinance, um, you get a, a, a home loan to buy an investment property, or you get a home loan to build on it, and they just call that particular home loan type a construction loan.

    [00:09:55] Sarah: Um, but yes, but it is a different product. But the overall, uh, the, the [00:10:00] basis of that loan is the same, is that they put a mortgage against your home. You, they, they lend you a certain amount of money and then you repay it. 

    [00:10:07] Matt: And they release it at certain stages with the construction loan. So, 

    [00:10:10] Sarah: yeah. So a construction loan is a different product, right?

    [00:10:13] Sarah: Just like an offset account is a different product, or, interest only is a different product. A construction loan is a different product. It's, it's some banks, not all banks offer construction loans. So some banks will offer construction loans where they'll go, all right, we will give you a certain portion of money for you to build your house.

    [00:10:31] Sarah: Whether that's a, so it's like a line of credit? Um, similar, but it's restrictive. Yeah. Right. Line of credits are generally for businesses that are bit more flexible and versatile. You can draw money out whenever you want, put money in whenever you want. There's restrictions on that construction loan where they'll go, okay, we will approve you of a certain amount based on the.

    [00:10:51] Sarah: the stage build contract. The 

    [00:10:53] Hamish: stage. Yep. 

    [00:10:53] Sarah: so if your build contract, let's say the overall build is a million dollars, um, how much can you afford, um, in terms [00:11:00] of services? Well, the, the industry jargon is serviceability. So what your income expenses allow you to afford, um, the loan. And then they'll say, all right, we'll, we'll give you 80% of that, let's say.

    [00:11:12] Sarah: Um, and that 80%, so that's $800,000 a construction loan means that they will only release portions out of that loan to the builder after various checks.

    [00:11:21] Sarah: Right. 

    [00:11:22] Hamish: And, and correct me if I'm wrong, the client's money will come out first Yes. To say if they've got $200,000, they'll finance the first $200,000 worth of payments, and that's when the bank kicked. 

    [00:11:34] Sarah: Correct. Generally you need to put, you need to put your deposit in first. Yep. So whatever your contribution party is first, but it goes through the progress payments and you know, we do it for, for you.

    [00:11:45] Sarah: Yeah. So, so for example, you send us an invoice, the builder send us an invoice and say, Hey, we've completed this stage. Um, there'll be checks to make sure that you have 

    [00:11:55] Matt: Yep. The bank will come out and inspect it, which is totally okay. Yeah. Correct. 

    [00:11:58] Sarah: There, there might be an inspection, there [00:12:00] might be some sort of verification that you've actually done what you said you've done.

    [00:12:04] Sarah: Mm-hmm. And then once that's verified and it's approved, then the bank will then release that money and it goes directly to the builder. It doesn't go to the borrower. cause well, sometimes we don't trust that. Yeah. All of a sudden they've got a new boat. So I've 

    [00:12:17] Hamish: literally, just before we, you know, got onto this conversation, I was trying to get onto the inspection of the bank.

    [00:12:26] Matt: Her and Todd, 

    [00:12:26] Hamish: her and Todd, to come out and inspect that stage of the project. I don't know if you can answer this or not, but we only get that on some projects. Yes. So what are the, uh, criteria for banks to want to come out and inspect stages? Um, 

    [00:12:46] Sarah: it really comes back to the bank's policy. Okay. So, so every, like I said, every bank has its own unique credit policy.

    [00:12:54] Sarah: Yeah. For every type of loan. For every type of product. Yeah. So some banks might go, all right, it's [00:13:00] certain it's under a certain amount. Right. Uh, of, of lending. They're happy to take the risk that Yep. You said you've done what you've done, we're happy to just pay it. 

    [00:13:09] Hamish: Yeah. 

    [00:13:10] Sarah: Um, over a certain amount or, or, or, or a certain area or location or a certain type of build or there's all sorts of different, um, checks that the banks want.

    [00:13:21] Sarah: Um, and, and that's what triggers it so that they might go. Or for this project? No. Um, our policy says we want someone out there every single time. 

    [00:13:29] Hamish: I don't, I don't know if you've experienced this, but I've found that the more progress claims that we have, so say if we've got, I know, so, so a normal progress claim is what, six stages or something?

    [00:13:40] Hamish: Yeah. So 

    [00:13:41] Matt: it's, yeah. And this is just with my next point. So yeah, we, we'd usually 

    [00:13:43] Hamish: have 10 to 12. Mm-hmm. And it's usually in line with smaller chunks. Yes. And sometimes our progress claims are a little bit us about to how they're normally Yes. You mean, and you, you would've experienced doing, 

    [00:13:56] Matt: it's better doing, you have small amounts.

    [00:13:57] Matt: It makes more sense from the client because they are not up [00:14:00] fronting huge amounts. And if something's going wrong with the builder, they can pull it a lot quicker. 

    [00:14:03] Hamish: I guess, I guess the point I'm trying to make is, I would say most of our listeners are probably gonna be in the situation where the bank is coming out to inspect because there's more progress claims and they're unusual claims.

    [00:14:16] Hamish: So I might have external building wrap and external service penetrations. That's a claim for me. Yeah. Yeah. Same. Where they're just like. What does this mean? 

    [00:14:23] Sarah: Yeah. 

    [00:14:24] Hamish: Yeah. 

    [00:14:24] Sarah: A lot of them won't even know what the, what, like you have your, your standard building contract. Yeah. Right. That's it's a template. Yeah.

    [00:14:31] Sarah: Right. Um, issued by HIA or whatever the society is. Yeah. Um, and they will have a specific list of, you know, whether it's they're default industry standards. Correct. Your, your deposit, your slab, your frame. Your 

    [00:14:45] Matt: lock up. Your lock up. You fix your final 

    [00:14:47] Hamish: base. Base 

    [00:14:48] Matt: frame, lockup 

    [00:14:48] Sarah: fix. Yeah, exactly. And they don't, 

    [00:14:50] Matt: they specifically do not work in high performance and passive house construction.

    [00:14:54] Matt: They are. If you are, it's the biggest mistake on the first one I did, I ran with the industry standard payments and it act [00:15:00] me hard. Cash flow. Cash flow. Fucked. 

    [00:15:03] Sarah: there are just so many variables for a bank, right?

    [00:15:07] Sarah: For you to choose the right bank to work with you, especially on a construction project. First of all, not all banks do construction, so then you've gotta weed them all out. And then out of the banks that does construction, do they do, you know, fixed price burden contract or do they do cost plus plus building contracts?

    [00:15:22] Sarah: You gotta weed those out depending on what you done. Owner 

    [00:15:24] Matt: builders, 

    [00:15:25] Sarah: owner builders weed those out and, and, and you know, work out. And then it gets to that. So some banks will be absolutely rigid and go, we will not go beyond those standard progress papers. We had one at the 

    [00:15:37] Matt: start of the year. They would not budge.

    [00:15:39] Matt: No. And they were one of the big four banks were not interested No. In budging on No. Any of those stage payments. 

    [00:15:45] Sarah: Yeah. 

    [00:15:45] Matt: At all. And I was like, well we can go back to that, but I've gotta now change your contract. Yeah. Because it's designed to make it more cost effective for you guys and it's gonna add a huge amount of money because I now need to fund more of a project upfront.

    [00:15:57] Matt: Yeah. So they changed it and another bank was like. [00:16:00] This is easy, like this is just done. Yeah. So you've 

    [00:16:02] Sarah: gotta find the banks that is willing to work with all the parties, right. And completely understand builders having more frequent progress payments because it helps your cash flow, it helps you run the project more smoothly.

    [00:16:15] Sarah: but, but on the bank side, some banks are just not willing to change or, or work, um, outside of that policy. I mean, 

    [00:16:23] Hamish: surely anyone can see that more frequent payments equals a better run business 

    [00:16:29] Matt: and less risk on the bank when it makes it and less risk 

    [00:16:31] Hamish: on the bank. 

    [00:16:32] Sarah: can't sort of comment on the risk on the bank side, but, but from a bank's perspective, they unfortunately, they have a policy.

    [00:16:41] Hamish: Yeah. Okay. So that's, and they stick 

    [00:16:42] Sarah: to that policy or you go outside of that policy? 

    [00:16:45] Hamish: Yeah. Okay. And 

    [00:16:45] Sarah: if they're not willing to go outside of that policy, then. Me, my job as a mortgage broker is to find the lender who's willing to do that. 

    [00:16:53] Hamish: Yeah, yeah, 

    [00:16:54] Matt: yeah. Okay. So, yeah, 'cause for me, the risk thing makes sense in the sense of like if you, [00:17:00] 35% of your payment is for a builder.

    [00:17:02] Matt: If that's a million dollar project, that's a lot of money. It's like, woohoo, I've got 350 K in my bank account and of nowhere I've paid a few of the trades. Let's go buy boat. A jet ski, like typical tradie does. From a bank's perspective, will they be better releasing small increment amounts along the way to get their checks and balances?

    [00:17:19] Matt: If they say, oh, twice we've gone on site now and they haven't done what they're told. Yellow flag. Let's maybe look into this a bit more, especially in, in a, in an environment where over the last few years, how many builders have gone under like 

    [00:17:31] Sarah: Yeah, 

    [00:17:31] Matt: it only makes sense. 

    [00:17:32] Sarah: Yeah. 

    [00:17:33] Matt: To, to, and, and, 

    [00:17:34] Sarah: but it is a lot of paperwork and a lot of, um, processing right.

    [00:17:38] Sarah: For the bank. 

    [00:17:39] Hamish: What's your top three tips to look for in, uh, a bank or, or a loan provider? 

    [00:17:47] Sarah: Um, 

    [00:17:48] Hamish: and I know it's a bit of a how long piece of string question because everyone's situation's different. Yeah. And everyone's, or everyone's financial and work situation's different and every construction project is different.

    [00:17:59] Sarah: [00:18:00] Yeah. I suppose if you are someone who's just going to your own bank, my tip is do they tick all the boxes that you are looking for in, in your loan? Yeah. Right. Because everyone's goals, objectives are different for their loan. Um, some people, believe it or not, might not care about the rate, but they absolutely want, um, I want, you know, 24 hour service.

    [00:18:24] Sarah: I want, um, I want a branch that I need to get into. Yeah. I want. Online apps or something, or I want, um, you know, I might work internationally. I want an international, um, presence and things like that. So, so whatever you want out of your loan, um, make sure that the banks, you're going to tick those boxes.

    [00:18:45] Sarah: Like, I will, like, what I do is I physically write them down or Right. You know, for map this is what you want. Has, does that bank tick those boxes? One of 

    [00:18:54] Matt: them was ethical banking for me. I didn't want someone who's investing in things like funds and, yeah, yeah, yeah. [00:19:00] But like, like that to me. So really we start to limit it.

    [00:19:03] Sarah: Yeah. Correct. Yeah. So the more, so, the more criteria you have, the more limited the bank options there are. Right. But having said that, there's, there's going to be always a lender for you. There should be. 

    [00:19:16] Hamish: Mm. Yeah. Um, depend on what you wanna pay. There's never a no. Right? It's 

    [00:19:20] Sarah: always, alright, well based on what you want, these are the options.

    [00:19:24] Sarah: Are you happy with those options? If you're not happy with those options and you wanna open more doors, then we might have to, um, I guess sacrifice a few of those, um, criteria and goals. And, and 

    [00:19:34] Matt: my case was hard 'cause I'm a builder, but I get treated like an owner builder. Correct. But then I wanted an ethical bank.

    [00:19:39] Matt: Correct. So we were very limited very quickly. Yeah. Okay. And I wanted different stage payments. So, 

    [00:19:44] Hamish: so I mean, I mean, you, you've obviously gone with Australia Bank. What other banks were an option for you? 

    [00:19:49] Matt: I think a NZ was maybe one of, I think for, I can't even remember. I was, I originally asked for Australia Bank or I think Bendigo Bank.

    [00:19:56] Matt: 'cause that's who I currently bank with, with business because 

    [00:19:58] Sarah: they're quite ethical as well [00:20:00] as in, they're, um, their cus customer friendly. I 

    [00:20:02] Hamish: one big four. They're social, they're so, they're really socially, um, connected as well. Yeah. Well, and there's branches everywhere for Bendigo. Yes. 

    [00:20:09] Sarah: Yeah. I mean they're very um, community based.

    [00:20:11] Sarah: Community based bank. Yeah. They're not a, you know, like your big four banks or Bendigo Bank Bank if you wanna sponsor. Yeah. Australia Bank. 

    [00:20:18] Matt: You guys have endless bank accounts. 

    [00:20:21] Hamish: They are good. I also bank with Bendigo for my business. So, 

    [00:20:24] Matt: but, but like, and 'cause the other thing like, yeah, so we had a very hard time and I, that's why I want to touch on owner builders for a second, is owner builders like one signing off work and you hold the same response.

    [00:20:35] Matt: He runs responsibility as a builder for the entirety of the builder. 10 years. You sign off on it, you don't have the insurance As we do two, when you go to loan, it's practically impossible these days. 

    [00:20:45] Sarah: Yeah. Not many people will do it. Um, I don't know why. It's like they don't trust you to build your own home.

    [00:20:51] Sarah: And I'm like, dude, that's the, the, the home that they're gonna build the best on. It's their own home. Yeah. They also, 

    [00:20:56] Matt: but they might sell it a lot of the time. And owner builders are the ones that cut a lot of corners. 

    [00:20:59] Hamish: What, what else? [00:21:00] So I, I've actually got a, I know someone at the moment who's, um, struggling to get an owner builder loan.

    [00:21:05] Hamish: Who, who are the Well, other than coming to see you, what's their Or 

    [00:21:10] Sarah: a mortgage broker. Or a mortgage broker? Yep. like they just have to, you just have to shop around? Yeah. Really shop around. Okay. Because, um, a lot of banks don't like owner builders. Um, you know, they do a lot of background checks, um, on, on you.

    [00:21:24] Sarah: Um, look at your, you know, previous projects and things. Um, look at your builder's license. Um, and they also limit how much you can borrow. Right. Okay. Right. So it's not like they're gonna go, oh, yep. Um, we'll just give you whatever you need. you know, you need to put skin in the game. Um, okay. So, so 

    [00:21:43] Hamish: an owner builder would get less if they wanted to run their own project versus if they got a builder to contract another builder?

    [00:21:48] Hamish: Yeah. 

    [00:21:48] Matt: And, and just for you get treated 'cause you're a licensed builder, you get treated as an owner builder. Just FYI. 

    [00:21:54] Sarah: Yeah. Okay. Yeah, because you are still building your own home. Yeah. Um. So there's, [00:22:00] there's that sort of arm's length. There's probably not as much separation. 

    [00:22:03] Matt: I would say they're probably not as lenient, but they, the conversation is probably a bit easier 'cause we can justify costings really quickly Yep.

    [00:22:09] Matt: With our tools and we can spit out where an owner builder's like, ah, I think it's gonna cost this, but we haven't got anything quoted where you'll definitely, 

    [00:22:15] Sarah: you'll, you'll, you'll most likely definitely need a fixed priceability contract. And I, it's what's ironic, I had to sign a contract 

    [00:22:22] Matt: with car constructions for Matthew Carlin, so both of us signed the same contract.

    [00:22:26] Sarah: Oh. 

    [00:22:27] Matt: So, so it's a very, it's all 

    [00:22:30] Sarah: about mitigating risk. I don't know. I'm not 

    [00:22:32] Hamish: gonna sue myself. How is that, how is that mitigating this? Well it doesn't make any sense. The 

    [00:22:38] Sarah: bank, the bank is only gonna give you what you said you're gonna cost. Yeah. Yeah. Okay. Is is it? 

    [00:22:42] Hamish: Right. And we're bang on like, Matt, Matt, Matt brought up something before a, a terminology before LVR and 

    [00:22:48] Matt: loan to value 

    [00:22:49] Hamish: ratio.

    [00:22:49] Hamish: Yeah. Yeah. Do you just wanna explain what that is? 

    [00:22:51] Sarah: So, and yeah, essentially LVR stands for loan to value ratio.

    [00:22:56] Sarah: Yeah. And it's a percentage, right? Yeah. So in the [00:23:00] simplest terms, it's what your loan amount is compared to the value of the property. 

    [00:23:05] Sarah: um, and I'll, I'll come back to that for construction loans 'cause it's very different. So let's say you wanna go buy a house, um, you went to, um, an auction or, or you bought a house and it's worth, you bought it for $1.5 million.

    [00:23:17] Hamish: Yep. 

    [00:23:18] Sarah: Um, you want a loan against that, you know, let's say it's, it's, it's 80% that you want. Right? Um, so that's a 1.2 that you want, 

    [00:23:27] Hamish: you wanna borrow 1.2 to buy the home Yep. To buy 

    [00:23:30] Sarah: a $1.5 million house. 

    [00:23:32] Hamish: Yep. 

    [00:23:32] Sarah: So what the bank will do is send out a, um, you know, third party valuer. So it's, it's non-biased or anything.

    [00:23:39] Sarah: It's, it's completely, you know, random selection of valuers. They go out there and they value the property. Um, that may or may not come in at the 1.5 mark that you just bought it at. 

    [00:23:49] Hamish: Okay. Yeah. That's the 

    [00:23:50] Sarah: risk, right? Yeah. generally speaking, under $2 million, generally it'll come in at that price. Okay.

    [00:23:57] Matt: That's market rate, isn't it? Like if you pay 1.5 isn't? [00:24:00] Well, not 

    [00:24:00] Sarah: really, because sometimes, especially our auctions, you might go emotional, a bit emotional and like, really want that Daddy, daddy starts bid for the daughter. It's like, oh, my daughter's not 

    [00:24:09] Matt: gonna get this. That's gonna be us in. 

    [00:24:12] Sarah: So generally speaking, you're gonna come in at purchase price, but there may be some issues that where it's not because a valuation of a property is, it looks at the surrounding areas of that, of where you've bought or where you are.

    [00:24:28] Sarah: Um, and then look at the last six months of activity there, what's been sold. Um, if you have a distressed sale down your street that people have let it go for a really, really low price, then that might hurt your valuation. 

    [00:24:40] Hamish: Oh, okay. 

    [00:24:40] Sarah: Right? 

    [00:24:41] Hamish: Yeah. 

    [00:24:42] Sarah: Um, but there are comparables, right? They might go, oh no, that place, you know, you, you've just done a renovation, so this is a, a, um, a superior fit out versus an inferior old 30, you know, year old thousand things.

    [00:24:54] Sarah: So, so do they exclude 

    [00:24:55] Hamish: the outliers or not? Or they put it all in there? Um, 

    [00:24:57] Sarah: yes and no. They put it all in there. Yeah. It's a massive formula [00:25:00] that the valuers do and they spit out a valuation. Yeah. And so let's say it comes in at $1.5 million 'cause that's what you bought it for then. Sweet. You're good.

    [00:25:09] Sarah: Your LVR is 80%. 'cause you want $1.2 million, you actually bought for 1.5 and the valuation came in at 1.5. 

    [00:25:17] Hamish: Yep. 

    [00:25:18] Sarah: Where it gets tricky is that, um, let's say you bought for 1.5, but the value it goes out there and go, oh no. Yeah, it's actually smaller land or whatever, comparables. Um, it's only worth one point.

    [00:25:32] Sarah: Four. 

    [00:25:33] Hamish: Yep. 

    [00:25:34] Sarah: The bank will then lend you, let's say, back to 80% of the 1.4, not of the 1.5. So you've gotta find the extra cash. So you've gotta 

    [00:25:41] Hamish: find the extra cash. Yeah. 

    [00:25:43] Sarah: Correct. So you have two options. You either forego that purchase, hopefully you've got a finance clause in that, in that contract. Yep. Please, please, please.

    [00:25:51] Sarah: Um, that's fine. But that's only if 

    [00:25:52] Hamish: you negotiate. Correct. You can't do that at auction. 

    [00:25:54] Sarah: Correct. 

    [00:25:55] Hamish: I was just gonna say that you can't do that at auction. 

    [00:25:57] Sarah: Ah, correct. But get legal advice. That's why your conveyance is [00:26:00] very important 

    [00:26:00] Hamish: with it, with a 10% check. 

    [00:26:01] Sarah: Yeah. Yeah. Um, but you know, you can get out of that and you go, I, I cannot get finance for this purchase because the valuation's coming low.

    [00:26:08] Sarah: Um, so you can get out of that or you stump up the difference yourself. 

    [00:26:13] Matt: Well, can't you get the insurance, what'd they call it, that lending insurance? Uh, LMI. Yeah. But it 

    [00:26:19] Sarah: will still. You've gotta fund that Yes and no, but you've, you'll fund that. Yeah. And it, the bank then at, at this stage, will only see that property as 1.4.

    [00:26:30] Sarah: They, they'll forget about the 1.5. They're like, it's not worth, unless you dispute her, you can try to dispute with the valuer, but that's of never one, or just, 

    [00:26:37] Matt: or most do is go the bank of mom and dad. 

    [00:26:40] Hamish: Maybe I'm speaking outta a line here, but it just, and not everyone's in a fortunate position to be able to do this, but it just seems bonkers to me if your, if your loan is 80% of the value of the home, like that scares the shit outta me from a Oh.

    [00:26:54] Hamish: Doesn't scare me. Oh, I dunno. That's just, I mean, that's a lot. Yeah, yeah, yeah. Yeah. [00:27:00] It scares the shit outta me. I mean, 

    [00:27:01] Matt: fuck, I've got no idea on. 

    [00:27:02] Sarah: Generally it will be at that level, if not more. Yeah. 

    [00:27:05] Matt: Yeah. I reckon I've ran some at 90 before. Yeah. 

    [00:27:08] Sarah: the highest you can borrow is actually 98%.

    [00:27:12] Hamish: Who are they lending that kind of money to rich people for someone 

    [00:27:14] Sarah: with very little deposit that wants to buy. Yeah. 

    [00:27:17] Hamish: But, but, but that, that obviously have a good paying job though, to get it across the line. So it's a 

    [00:27:22] Sarah: different thing, like to get a loan, there's three things that you Absolutely. Um, the bank looks at, right.

    [00:27:27] Sarah: Um, your, your income expenses. Yeah. So how much you earn and how much you spend. Yep. And therefore, what's left over as a surplus that can allow you to make loan repayments that's called serviceability. Yep. Um, and then, um, the, the equity side, so how much contribution you can put in yourself Yep. Versus how much you can, you know, you can borrow.

    [00:27:47] Sarah: Yep. Um, up to that. And then also the third thing is the property itself. Does the bank want that property? 

    [00:27:53] Hamish: They might not. I like, I understand it from an investment point of view. Yeah. Like, it makes total sense to me from, from a personal home point of view, 

    [00:27:59] Matt: [00:28:00] it's all risky. It's how much risk you want to take.

    [00:28:01] Matt: So, but like I'm saying, I'm assuming if I had a $1.4 million in my bank account, I could probably borrow the 98% if the home's worth 94. Uh, 1.4 mil. Like the more that you have saved, wouldn't that, 

    [00:28:13] Sarah: not necessarily, because how much you can borrow is depending on your income. Yeah. So just because you've got a lot of money saved and, but you're not working or you don't have an income, then technically you can't borrow anything.

    [00:28:24] Matt: Yeah. 

    [00:28:25] Sarah: so how much you have saved is the equity part, um, versus the income expenses part is different. So the bank checks and everything. 

    [00:28:33] Hamish: So here, okay, so you're talking about equity, but, and equity can also exist elsewhere as well, correct? You could use, 

    [00:28:39] Sarah: it doesn't have to be cash.

    [00:28:40] Sarah: Cryptocurrency. Well, how has that one gone? I don't know. I haven't had that one before. But you could, you could use, um, another property. Yeah. If you've got other properties mm-hmm. That you can chip in, you could use the bank of mom and dad. 

    [00:28:54] Hamish: Yeah. That's 

    [00:28:55] Sarah: equity. 

    [00:28:55] Hamish: Yeah. So how, so, so I think I know the answer to this, but say, say I've got another property over [00:29:00] here and I might have.

    [00:29:01] Hamish: $500,000 worth of equity in that one. 

    [00:29:03] Sarah: Yeah. 

    [00:29:04] Hamish: How does that work if I don't have the cash to make up the difference? How does, how does that scenario work? 

    [00:29:09] Sarah: Yeah. So I put then two properties together into the pool. Yeah. So the bank looks at both properties. Mm-hmm. Let's say you've got a million dollars here in one property and you're buying 1.5 like the example before, so all of a sudden you've got $2.5 million of property that they can leverage up against.

    [00:29:24] Hamish: Yep. 

    [00:29:25] Sarah: So, so you've got equity 

    [00:29:27] Hamish: and then what does the bank do to this other property over here? 

    [00:29:29] Sarah: They'll take another mortgage. Over another mortgage. 

    [00:29:31] Hamish: So two separate mortgages? Yes. Yep. Okay. A 

    [00:29:33] Sarah: mortgage is on, on one property only sort of thing. Yes. So you have a mortgage over one property and then another mortgage over the other property.

    [00:29:40] Sarah: Yeah. But it's all part of your, um, your assets in Yes. Um, Yeah, to leverage against, yeah. Yeah. But going back to the LVR, it's a little bit different for construction loans, right. Because. At the start of the project, your property, um, might be worth only just the land. Yeah. It might be a, a [00:30:00] vacant block of land.

    [00:30:01] Sarah: And then you go through the whole process of designing a house, um, getting the builder's quote, uh, you know, contract and all that. Um, and what the bank does is the bank then goes and does a valuation based on the drawings, the plans that you borrow, and they give you two, quote, uh, two amounts. So they'll give you a, a, a, a valuation of what it is as is now.

    [00:30:24] Sarah: So, so if it's a house that you're gonna knock down and, and rebuild, then it's whatever the house, it's on there now and the land. And then they look at the drawings and, and what you're going to do on that property. And then they give you another valuation called on completion, which is what they think that's gonna be worth once it's all built according to those specs.

    [00:30:43] Hamish: Yeah. Yeah. Yep. 

    [00:30:44] Sarah: Okay. And so for a construction loan, it's what you are borrowing in that future value? 

    [00:30:48] Hamish: Yes. Yep. 

    [00:30:49] Sarah: So it's a little bit different. Yep. Because you might be knocking down a really crappy old house that's probably only worth $200,000 and the land's worth, you know, $600,000 and you're [00:31:00] knocking away the $200,000 old house, but you are gonna build another million dollar house on it.

    [00:31:04] Sarah: That's beautiful. And all of a sudden your future valuation is, you know, 

    [00:31:09] Hamish: 1.5. 1.5. Yeah. I mean maybe, maybe more. 

    [00:31:13] Sarah: Maybe more. You hope that it's more, hope it's more. 

    [00:31:15] Hamish: Yep. Yeah. 

    [00:31:16] Sarah: Um, never include landscaping. 'cause I've, I've never seen a landscaping, I'm sorry, landscapers. So 

    [00:31:21] Hamish: landscaping really add that much value.

    [00:31:23] Hamish: Yeah. So I was gonna ask that too, because I have had some banks. Um, want the landscaping plans as well. 

    [00:31:30] Sarah: Yeah. That you can definitely put into it. Yeah. Um, it might add a few bit of value, um, but it's never going to be as much as you think what you're gonna put, and, and ironically 

    [00:31:38] Hamish: they're wanting, so a lot of the time we are not including, uh, solar panels and batteries in our pricing.

    [00:31:43] Hamish: Yes. But we're, we're obviously running all the conduits and stuff for it, or pre-wiring it, but the bank is still wanting to know Correct. How much that's gonna be, be how much it's gonna be, because that probably has more of an impact than your landscaping. And that ties in nicely green loans. Yes. Yes. 

    [00:31:59] Sarah: So, [00:32:00] absolutely.

    [00:32:00] Sarah: So all those other things that you're putting on, um, 

    [00:32:03] Hamish: I hate the term green loan, by the way. I hate it. What, but what else are you gonna call it? Like, it's just such a, it's a, 

    [00:32:08] Matt: I don't know, but it's sustainability loan. Just the, the industry we live in is like buzzword. It's just another way. Makes feel better.

    [00:32:14] Hamish: But anyway, carry on. We digress. We digress. Yeah. 

    [00:32:17] Sarah: so yeah. So you'll want to add all those bits and pieces into it. Um, to, to add value to that property in the end. Yeah. And then you can therefore borrow more against that future value. 

    [00:32:28] Hamish: And, and what is the bank looking for when they're doing that assessment?

    [00:32:34] Hamish: So, we have this example at the moment, project under construction. They ended up going through Bank Australia. Mm-hmm. And Bank Australia were a little bit more lenient mm-hmm. Because they looked at, I think this is not a passive house, but it's, it's sitting in PHI, low energy territory. Mm-hmm. And it's getting a really high star rating as well.

    [00:32:52] Hamish: I think it's eight high eights or maybe even low nines. Wow. Um, so really, it's a really high performing property. 

    [00:32:58] Sarah: Yep. 

    [00:32:59] Hamish: Um, [00:33:00] but there's only two people living in it. Yep. And there's only a three bedroom home. 

    [00:33:03] Sarah: Yep. 

    [00:33:03] Hamish: But the bank's like, oh, maybe you could put a fourth bedroom in. So they're actually suggesting, which I find ridiculous, spend more money.

    [00:33:13] Hamish: It's 

    [00:33:13] Sarah: a little bit, yeah. 

    [00:33:14] Hamish: So it was, it was a really odd scenario that. Yeah. Like, uh, you know, but they, 

    [00:33:19] Sarah: they've seen the plans, right? Yeah, yeah, yeah. They've seen the drawings. They know what the, what you're building. Yeah. 

    [00:33:23] Hamish: So it's like a, it just, for me, it seemed really odd that they're suggesting, well, if you had another bedroom, you know Yeah.

    [00:33:31] Hamish: Our, it wouldn't be an issue. 

    [00:33:32] Sarah: So I just wanna make it clear, take a step back. It's not the bank that does the valuation. Sorry. It's the, it's the value, sorry. Valuation. The valuer. Yes. The valuer is a different entity to the bank. Yes. And it's, the bank can't influence the valuer anyway, um, because they're non-biased.

    [00:33:50] Sarah: You know, the value is a, are picked in a random pool. 

    [00:33:53] Hamish: Yep. 

    [00:33:54] Sarah: Um, so, so what the value was saying there, I'm just trying to guess, is that, hey, you can probably [00:34:00] get a better valuation by adding in another Exactly. 

    [00:34:03] Hamish: Exactly. Yeah. Yeah. That's so, 

    [00:34:05] Sarah: so why would they say that? Are we having difficulties with the LVR?

    [00:34:10] Sarah: Like, are we, are we saying the valuation is not high enough? 

    [00:34:14] Hamish: So, I mean, I don't, I don't much It's, but, but look at, at the, at the end of the day, it just seemed interesting to me that, you know, in a world where we're in a current market where sustainability's huge, um, you know, I am really trying to convince clients just to build what they need.

    [00:34:32] Sarah: Yep. 

    [00:34:32] Hamish: Because of absolutely construction prices being where they are and but just also heating and cooling these places and sustainability in general that 

    [00:34:40] Sarah: white elephants that's out there, imagine the heating of, 

    [00:34:43] Hamish: but then you've just got, you, you've got, you know, real estate agents and potential future buyers in mind where I'm unlike, well, if this is gonna be the home that you're gonna be in for the next 10, 15, 20 years, none of that matters.

    [00:34:56] Hamish: Correct. And you just need to look at what you are doing. It just seems ironic [00:35:00] that. They're disconnected with the valuation of the property. Correct. That's so, sorry. That's just my roundabout way of kind of looping that, the relevance of that back in. So 

    [00:35:07] Sarah: unfortunately, valuations real estate agents and, and future sales market, that's still quite old school, right?

    [00:35:15] Sarah: Yeah. In that the more bedrooms you have, the more it's gonna be valued at. Yeah. you know, it's gonna take a lot to change that mind set. Do you think 

    [00:35:23] Hamish: it's changing? 

    [00:35:24] Sarah: yes and no because it, it's a market movement, right? Yeah. So, so with one house that's really efficient. You can't, uh, say one house that's really efficient on the street, that's not gonna change the value of that house if no one else has Yeah.

    [00:35:39] Sarah: Has changed on that, you know, on that street, right? Because the valuation looks at your particular property based on the surrounding areas and what's happened in the last Yeah. You know, recent months. But if, let's say there's four houses on the street that is sustain, you know, highly performance and efficient, then that might change the overall valuation of that property.

    [00:35:59] Sarah: Yep. [00:36:00] Right. So it's, it's like a market sort of infiltration, 

    [00:36:04] Hamish: if that makes sense. And, and what I'm about to ask you now is more of an, your opinion because it is relevant to this conversation. You've recently renovated an old merchant building. Yes. So a volume builder home, and you've decided to invest, I would say a good amount of money in turning this into a passive house certified.

    [00:36:24] Hamish: So we don't get picked apart by the association. It is certifi, a certified passive house. Yes. Certified passive. Now I don't, I don't, I don't want to go into how you finance it or paid for it 'cause it's kind of irrelevant. We're moving into a market now where these projects need to become more frequent.

    [00:36:37] Sarah: Yep. 

    [00:36:38] Hamish: How are the banks looking at these kinds of projects versus how they used to look at them before? Like are, because obviously it's, it costs a bit more to, to do what you've done. And I've got three projects at the moment. Very similar design team and consultant team is who you had. 

    [00:36:56] Sarah: Yep. 

    [00:36:56] Hamish: And my clients are incredibly motivated and we haven't [00:37:00] got to the point with how much has been financed and how much has been ca you know, cash injected.

    [00:37:05] Hamish: Yep. But I'm curious to know as we move into this kind of phase where more of these buildings are gonna become more popular. 

    [00:37:12] Sarah: Yep. 

    [00:37:12] Hamish: As in people that are renovating their existing home. Yep. Not extending, just Yep. Just upgrading the thermal performance. 

    [00:37:18] Sarah: Yep. 

    [00:37:18] Hamish: How are the banks looking at those projects? In your opinion, 

    [00:37:21] Sarah: to be brutally honest, and I'm really sorry for the banks, they don't give a fuck.

    [00:37:24] Sarah: But they're, they 

    [00:37:25] Hamish: don't give a fuck do that. They 

    [00:37:26] Sarah: they do not. 

    [00:37:27] Hamish: Yeah, 

    [00:37:28] Sarah: they do not. Okay. All right. They, they absolutely do not Australia Bank do. So, so, yes. So, so there's the banks that are subscribing to green, um, sustainability and efficiency. They will create policies, a, a credit policy, which is what the under underlying sort of ethos of every home loan, they will create credit policies that will, that will benefit, um, sustainability and efficiency.

    [00:37:54] Sarah: Yeah. Um, so for example, bank Australia is one of those banks where they are absolutely [00:38:00] the forefront of, um, green loans. You know, they will, they will, um, uh, reward you for having a high rating star with very low interest rates for the, for the five years. Um, they will give you. Higher borrowing, um, capacities, LVRs and things in order to help you to, to, to, you know, build that home.

    [00:38:20] Sarah: But generally speaking, green loans aren't, you know, aren't the the majority of the hormone loan market. Yeah. 

    [00:38:27] Hamish: Yeah. 

    [00:38:27] Sarah: Um, so you really need to, there's clever ways to restructure your finance, right. To look at your entire portfolio of assets and liabilities and go, what is my absolute borrowing capacity?

    [00:38:41] Sarah: Work that out and structure ways with other assets and, and, and, and, and that you've got to get what, to get the funding that you need. Yeah. 

    [00:38:49] Hamish: Do you, and I guess it's one of the reasons I'm asking this is 'cause I'm thinking about one of these projects in particular where we might spend six months on this project and you [00:39:00] might look at it at day one, and then you might look at it in six months time.

    [00:39:03] Hamish: And you'll look at the home and it will look almost identical. 

    [00:39:06] Sarah: Yep. 

    [00:39:06] Hamish: To what it was before. 

    [00:39:07] Sarah: Yeah. 

    [00:39:08] Hamish: However, I'm stripping the roof off. Yep. I'm stripping the cladding off. I'm putting new windows in, I'm putting really good membranes on. I'm insulating it really well. 

    [00:39:14] Sarah: Yep. 

    [00:39:15] Hamish: So the living experience is gonna be wildly different, but from the street view, 

    [00:39:19] Sarah: yeah.

    [00:39:20] Hamish: It's gonna almost look the same. 

    [00:39:21] Sarah: Yep. 

    [00:39:22] Hamish: So I, I guess I'm just trying to understand how are the banks value valuing these things? So the, 

    [00:39:28] Sarah: the, again, it's the valuer that's valuing it, not the bank. Okay. Sorry, sorry, sorry. How is 

    [00:39:33] Hamish: the valuer valuing these things? The 

    [00:39:35] Sarah: valuer, you absolutely need to request them to go inside and have a look.

    [00:39:39] Hamish: But, but, but if we're talking about something that's not seen, how is the value of valuing? You've, 

    [00:39:45] Matt: you've gotta feed them information if you don't tell them Correct, 

    [00:39:47] Sarah: you feed them all that information, you kind of understand where I'm, you're not a hundred 

    [00:39:50] Matt: percent you, where I'm going this, this is where you're gonna be a bit of a 360.

    [00:39:52] Matt: We talk about getting your design team, your energy consultant, your interior design. You build it together at the start of a project, get [00:40:00] your mortgage broker in. 

    [00:40:01] Hamish: Wow. Okay. Instantly 

    [00:40:02] Matt: from the start, and I say it to all my clients, engage someone because well see the 

    [00:40:06] Hamish: first, the first thing we ask in our, in our application form is, is this cash or finance?

    [00:40:11] Hamish: Or is it a, or is it a combination? 

    [00:40:13] Sarah: What do you find? What do you find? 

    [00:40:14] Hamish: Uh, well, 

    [00:40:16] Matt: anything over the age of 60 is just cash. 

    [00:40:18] Hamish: Yeah. So, so, so, so there are, there are some who are cash, but I would say majority are taking out some kind of loan, some kind of loan. But we're looking at, um, all the metrics that we're asking.

    [00:40:29] Hamish: Yeah. The questions we're asking, and I won't go into that too much detail. I, if people wanna know, they can go onto our website and find out. But, um, www.carlinconstruction.com or your sentence do com slash contact. Um, but like, so, so finance and loans do come into it. So it is interesting that you say Matt, yeah.

    [00:40:47] Hamish: Bring your mortgage broker in. They're part of the team because we want know, like we don't wanna know that they're financing it at the end of the costing because we want to know that they've got funds. Yeah. What if they, what if they go, 

    [00:40:58] Matt: oh, I've designed this, but we can't afford it. Yeah. [00:41:00] Correct. Correct.

    [00:41:01] Sarah: So I see that lot. So I do a lot of commercial build as well, um, funding for that. And we are talking $6 million big, massive builds. And I get that a lot where people. Um, are very enthusiastic. They look at the specs and they go, I wanna design this massive commercial building. It's gonna have this and this and that, and get the architects involved and get a cost and get a, um, a feasibility report and all that.

    [00:41:27] Sarah: Sort of spend a lot of money doing all of that. And then at the end of it, the builders come in and says, this is gonna, how much it's gonna cost me, it's gonna cost you about $4 million to build. And then all of a sudden they go, I, I don't have that money. Mm. Well how am I supposed to fund this? Yeah. So you, you, you've sort of wasted time, energy, and, um, you know, deposits and things on, on a non, you know, on a, on a dream that can't be done.

    [00:41:53] Sarah: Yeah. Yet. So that's lose. So the best thing is, the absolute best thing is, is literally [00:42:00] if, if you're thinking about a project that's building, get your finance sorted first. A hundred percent. Absolutely. But's because it's the other way around. You can. You know, imagine someone that comes to you and says, Hey, I wanna do this, but I literally, my max is this.

    [00:42:15] Sarah: What can you do for me at this level? We, 

    [00:42:17] Hamish: we actually have in our questionnaire, what is the number that scares you? So we, generally speaking, we have a pretty good understanding of where the project will fall over and Dan's really good at asking these questions straight up going, how are you funding it?

    [00:42:31] Hamish: Got no doubt. He is, oh, he very, he's very good at doing it. And he, and, and we, look, I think honesty in all of these things is the best. 

    [00:42:39] Sarah: Absolutely. You gotta be open and honest. And I know money is very sensitive. Yeah. Right. Like, especially different 

    [00:42:45] Matt: cultures could be very different, different 

    [00:42:46] Sarah: cultures are different.

    [00:42:47] Sarah: It's sensitive, but it's not, it's not that. Um, like I'm certainly not here laughing and you going, oh, is that all you can afford? No, I'm working my ass off. Trying to get you that extra money. Yeah. To, to build [00:43:00] the dream house that you want. Right. I'm 

    [00:43:01] Matt: gonna give you how important a mortgage broker is and the level of trust I had in Sarah.

    [00:43:05] Matt: And I've never really leveraged this and I got to because. Sarah became my mortgage broker. Halfway during her build, she got full access to everything I had. That's the level of trust you need to have in your mortgage broker. Okay. Yeah. Yeah. I'm building her house. 

    [00:43:18] Hamish: Yeah, yeah, yeah. And she sees everything.

    [00:43:20] Hamish: So you could see up his skirt when he was building your Yeah. Yeah. Okay. 

    [00:43:24] Matt: That is the level of trust that you need to have. Yep. Like it's, it's really, and I've gotta leverage it because, 

    [00:43:29] Hamish: because it, I mean, it is confronting, right? Like, you know, having someone go through your finances Yes. Is a, is a confronting thing.

    [00:43:35] Hamish: Yeah. And they weren't 

    [00:43:35] Matt: the greatest at the time. Like, we, like we've gone through two threes of COVID. Like, like that's like, it's not, um, like everyone sits here and thinks builders make billions of dollars. Um, I, like 

    [00:43:45] Sarah: you don't, 

    [00:43:47] Matt: I haven't got my boat in jets. I 

    [00:43:49] Sarah: literally like. So people who, who works with money every day?

    [00:43:52] Sarah: I am here. I, I cannot say this enough to every, all of my clients. I'm not here to judge. Yeah, I am. Absolutely. You're that [00:44:00] help. Not here to, I'm absolutely here to you. Tell me what you want. Yeah. And I will, I will work my ass off to try to get it for you. Yeah. But, but at the end of the day, you need to be open and honest and have a really sort of dynamic conversation about, alright, this might be your goals.

    [00:44:17] Sarah: Yeah. And I'll always start with utopia. Yeah. But this is actually where you are in terms of your affordability. Yeah. How do we judge that sustainability? And 

    [00:44:26] Hamish: here's a question for you. You talked, can I, can I jump in because I want can Sorry, because I 

    [00:44:29] Matt: wanna give a plug on Sarah too here. Uh, not just 'cause she's here.

    [00:44:32] Matt: We sat in this exact room. When we are looking at your project, actually one of the other projects that's not going to site. And I originally had a mortgage broker and we, you had just given birth. Three or four days before to your second child? Yes. We are in the meeting here and I'm sitting here being like, Sarah, I'm taking notes.

    [00:44:52] Matt: It's okay. You just chill. She's like, no, no, I'm working. Like that is her work ethic. I think I 

    [00:44:57] Sarah: signed loan documents for the client. [00:45:00] Um, I was still in hospital after giving birth 9:30 PM the night before, and I signed loan documents with the client over the phone in the hospital at 10:00 AM for the day in, in between 

    [00:45:12] Hamish: contractions.

    [00:45:13] Hamish: So, hang on, I just, just 30 seconds so that 

    [00:45:15] Matt: that's, that's how much Sarah's gonna fight for you to get 

    [00:45:18] Sarah: that loan. I'll not let a loan fail. Yeah. I'm, I'm gonna, 

    [00:45:21] Matt: I'm so, so I'm Anyone listen, she's having questions. That is like 

    [00:45:26] Hamish: her work ethic. That is my work ethic. But, you know, and, and I want to, I wanna come back to how people can get in contact with you.

    [00:45:32] Hamish: 'cause I think it's really important and hopefully, you know, people will call you and you'll get loans for them, but how else can people get money? Mom and dad, because I know, because I know, I know mom and dad's one another thing. Yeah. But I know that there are other markets where you can get money from.

    [00:45:44] Hamish: Yeah. 

    [00:45:45] Sarah: So there's all sorts of different lenders, right? Mm-hmm. To me, house of, you know, bank of Mom and dad is still a lend. You're, you're just borrowing your future inheritance, really? Yes. Yeah. So to me it's always just a lend, right? Yeah. It just depends on, [00:46:00] um, and, and I say this to all my clients, it, it just depends on who is funding that lending.

    [00:46:05] Sarah: Right? 

    [00:46:05] Hamish: Yeah. 

    [00:46:06] Sarah: To me, a bank is a bank is a bank. They're just a source of funds for you. Yeah. So there's different tiers of banks, right? You, there's your majors and your second tiers and your thirds. There's, um, if you, if your financials are not, you know, um, prepared on time Yeah. Or there's all sorts of other private lenders that you can tap into.

    [00:46:25] Sarah: It all comes down to there will be a lender that will able to help you fund your project. It comes down to what your circumstances are and whether you are able to, um, accept those loan terms. Yeah. Um, 'cause 'cause 

    [00:46:38] Hamish: generally those, uh, say if your financials aren't great and you wanted X amount of dollars, there's always someone that will lend you that money, but it's probably at a higher correct.

    [00:46:46] Hamish: Interest rate. Correct. 

    [00:46:47] Sarah: Because they're taking a more risk, 

    [00:46:48] Matt: a higher risk, and a minimum term at that rate that you fixed it. Yeah. Um, 

    [00:46:52] Sarah: it's up to you. Right. If you, if your priority is to get this project off the ground and get it done Yeah. Then you might be [00:47:00] happy to wear that cost.

    [00:47:01] Sarah: Yeah. But it's not long-term cost. It's not like you're paying that for 30 years. Yeah, a year and 

    [00:47:05] Hamish: a half on the projects. On site. I had a, I had a client who, where we were, we were building a home, a pretty, um, uh, it was, it was a different home, right. So I won't go into too much detail, but he ended up going and sourcing a portion.

    [00:47:18] Hamish: Um, out in the business market. Yep. And there was a, there was the home loan and then there was this loan over here, which is a higher interest rate. Yep. And his goal was at the end of it, just consolidate the loans. Yep. 

    [00:47:28] Sarah: Yeah. Absolutely. So once 

    [00:47:29] Hamish: it's as built Yes. You know? Correct. So 

    [00:47:31] Sarah: it's never your, your higher rates or your private lenders or whatever they know as well, you are only using them for that particular project.

    [00:47:39] Sarah: Yeah. Right. Once it's all done. And, um, I, I get that a lot, you know, um, Hey Sarah, I've got this nice block of land. I really wanna build four townhouses on here. I've got no income. Um, but I've got the land and I'm, I wanna build these four townhouses. Okay. Really, your traditional funders are gonna be not looking at you.

    [00:47:58] Sarah: Right? So [00:48:00] we go to a private lender and we go, okay, based on that land value, I'm happy to give you the funding. Um, for, to build those four townhouses. You might go, alright, I'm gonna sell two of them, um, at the end. So that might take you 18 months to build, you sell two of them, use that proceeds to then pay off that loan, refinance whatever's left over onto a traditional home loan.

    [00:48:19] Hamish: Yep. 

    [00:48:19] Sarah: So all those higher costs, really, it's, it, you're not forced into it, but, but you need to justify in your mind, do I really want this project? If I want it, then I'm happy to pay for this cost and it's temporary. And I know in the future I'm gonna be in a better position to put those funds into a better way.

    [00:48:38] Sarah: Yeah. 

    [00:48:39] Hamish: So, so there's a risk there and, and you obviously factor those costs into the overall amount that you're paying to get those four townhouses built. 

    [00:48:46] Sarah: Yeah. Yeah. I see my job is to. Again, goes back to what are your goals and objectives based on your goals and objectives. I will give you the best, you know, top five lender options.

    [00:48:58] Hamish: Yeah. 

    [00:48:58] Sarah: Um, and I will tell you the pros [00:49:00] and cons in each one of them. And then it's up to you to decide who you want to go with. 

    [00:49:04] Hamish: Yeah. 

    [00:49:04] Sarah: Um, now some, some brokers might just recommend and go, this is what I think you should do. I don't feel comfortable doing that because, um, I see my job is giving you options and you the borrower because you are, you, you are the one signing on the dotted line.

    [00:49:18] Sarah: Yes. Right? Yes. You need to be comfortable with what you're signing and you need to be able to sleep at night and so do I. So, yes. 

    [00:49:25] Matt: Yes. It's a lot of money. You 

    [00:49:27] Sarah: know, it is money. Right. And I, I definitely don't wanna be putting you into a loan that you can't afford, or you have mortgage stress that doesn't keep, that doesn't make me feel better either.

    [00:49:39] Sarah: So my job is to inform you, um, and, and, and help you, um, you know, select the Yeah. The decision. Yeah. Yeah. 

    [00:49:48] Matt: You live in a passive house. Yes. What's it feel like? Where today? It's been freezing. It's cold. 

    [00:49:54] Sarah: I don't know how to say it.

    [00:49:55] Sarah: It's like one of the, I I literally don't wanna go outside. 

    [00:49:59] Hamish: Do you know, it's [00:50:00] funny you, your inability to answer it is exactly what I really want to try and I've been trying to capture this in marketing in a, in some kind of marketing campaign. 'cause I can't put my finger on it. 'cause I've gone and stayed in my friends who we've built and I, I, it's a feeling, it's a, it's, it's 

    [00:50:18] Sarah: comfortable.

    [00:50:19] Sarah: It's uh, just less stress and, and I know that things just tick along and work. Yeah. And, and they're working, for the best of me sort of thing. Yeah. And my family obviously. Um, it's just, yeah. It's just like no hassle living. 

    [00:50:37] Hamish: And, and I want, and I want to just reiterate, this was a renovation. Yes. This wasn't a new build, it was a renovation.

    [00:50:44] Hamish: Because I think that there are a lot of people out there now with this dream of wanting to live in a passive house and them saying, well, I'm never gonna be able to afford it. But you know, your situations, I'm not gonna say it's unique. There are so many people [00:51:00] throughout Victoria and Australia who are living in these shitty homes.

    [00:51:02] Hamish: And they can live that they can have, there's a 9 million 

    [00:51:05] Sarah: of them. They absolutely can because, um, well we didn't know we could do it right at the start. It was 

    [00:51:10] Matt: a hypothesis. The whole idea of this project, like, can we turn an old volume builder house into a passive house? The answer is yes. 'cause now Sarah lives in one.

    [00:51:17] Matt: Yeah. And, 

    [00:51:17] Sarah: and I remember when we first chatted Matt, it was like, Hey Matt, do you wanna take on this project? And, and Matt's first response was, well, you know, I'm only doing things that is cool. And you know, 

    [00:51:27] Matt: and luckily I've got, I've got Shane who just goes down a rabbit hole. And I was like, I 

    [00:51:33] Sarah: just wanna do things.

    [00:51:34] Sarah: That's a challenge. No, I don't wanna build normal houses. And, you know, and we're like, I can 

    [00:51:38] Hamish: totally imagine that. 

    [00:51:40] Matt: I turned out, I found the perfect clients because her partner Shane literally has 

    [00:51:46] Sarah: Yeah. 

    [00:51:47] Matt: Gone down the biggest rabbit hole. Yeah, he loves it. 

    [00:51:50] Sarah: And he will give you, you know, like 10 different options and go, what about this?

    [00:51:54] Sarah: And what about then and what about this? And Matt will just go, no, no. 

    [00:51:57] Matt: Understand When you need the questions and answer, you go to Sarah. [00:52:00] When you wanna push the envelope, you go to shape. Yeah. So 

    [00:52:02] Sarah: it's absolutely doable. Yeah. I don't think, to be honest, it like it did cost a little bit more, but I didn't think it would costed that much more that we go, oh, you know, we're not, you know?

    [00:52:13] Hamish: Yeah. Because you've obviously seen as a, as someone who lends money for a living or, or, or procures or helps people procure loans for a living. You've obviously seen value in what you've done. 

    [00:52:25] Sarah: Yes, absolutely. Because from a money side, what we've done is, um, I. Converted something that yes, you could absolutely live in.

    [00:52:35] Sarah: When we bought it, it was a 30, 40-year-old house, um, you know, with 30 and 40-year-old decor, and, you know, you could absolutely just live in it. Um, but oh, 

    [00:52:45] Hamish: I don't know if you could, that was, I saw, I saw pictures during it stained, there was mold, there was everything. It was stink was just awful. Yeah, yeah.

    [00:52:55] Hamish: In fact, drew, drew said he walked in there and said he had to leave. 

    [00:52:59] Matt: Legit. [00:53:00] This is a true story. Drew walks in like a sniffer dog, go and just like sniffed his way to a wall. Remember, rip the past, drop the wall and go, see? I told you there's mold. Yeah, yeah, there was mold 

    [00:53:10] Sarah: every, I mean, like, yes. You could still live in it, right?

    [00:53:12] Sarah: Like, like absolutely. Don't get me wrong, you could live in it, but. What we've converted into is something that I, I literally do not want to go outside now. 

    [00:53:21] Hamish: Yeah. 

    [00:53:21] Sarah: Like, it is just my favorite place in 

    [00:53:23] Hamish: the world. I mean, the interiors are beautiful. Like big props to Erin. You know, we, you, we do a lot of work with Erin and what she's turned that into, and obviously what Matt and his team have, um, produced is incredible.

    [00:53:34] Sarah: Yeah. And look, um, let's be completely honest about Erin and her hair and all that. At the very start when Matt talked about it and he's like, oh, who are you working with for interior? And we were like, I don't know, maybe her, and I think you introduced us to her hair or something. Or maybe Shane knew about it.

    [00:53:50] Sarah: Or Shane. Shane. I think 

    [00:53:51] Matt: Shane had already on his, one of his side quests as already engaged. 

    [00:53:54] Hamish: Well, I mean, I, because so, so I talked to Shane Yeah. Years ago. Yeah. That's how I got the client. That's how we got the link. [00:54:00] Yeah. So it was, it was all, probably all, it was all, yeah. All intertwined. 

    [00:54:02] Sarah: Yeah. And I was like going, surely.

    [00:54:05] Sarah: This is, and I'm being brutally honest, surely I could do the design myself. Like, how bad is it? I'll just look on pin interest and, and just pick out the color. Just hang, just hang on a 

    [00:54:14] Hamish: sec. Hey Matt. Surely I could go and get my own home loan myself. Surely, surely It's that easy. I'll pay 3% rate. I can go and procure the best timeline.

    [00:54:25] Hamish: Exactly right. Yeah. Okay. 

    [00:54:26] Sarah: And, and, and even at the very start, and I'm just like, I don't know if I need Erin. I don't know if I, I, I wasn't sold on the whole thing at all. Yeah. Um, and then we got to the, the, you know, the engagement piece, the design piece and all that. And, and there's like, literally, I think I had a thousand questions thrown at me.

    [00:54:48] Sarah: Well, what about this? What about this? What do you want this, what do you want? I'm like, I don't, I don't What So income, Erin, who. Gathered all of our just like, you know, just like you [00:55:00] said, just like what I do for Morgan, she gathered all of our goals and objectives 

    [00:55:03] Hamish: mm-hmm. 

    [00:55:04] Sarah: And what we like and what we don't like and was very high for her.

    [00:55:07] Sarah: So, so kudos to Erin because Shane and I are polar opposites for what we like and what we don't like. Literally polar opposite. So she had to come and, you know, funnel everything and get to a middle ground and then sort of spit out this. 

    [00:55:22] Matt: Yeah. 

    [00:55:22] Sarah: Beautiful home. Yeah. That I just went. I love it. 

    [00:55:26] Matt: There's, there's, there's your marketing own.

    [00:55:28] Matt: I don't, I, I didn't have to 

    [00:55:29] Sarah: answer a thousand questions. Well, I sort of did, but in a way that was, um, doable and I didn't have decision fatigue and it was nice to talk to Erin to, to go. She's like, oh, what do you think about this? And what do you think about that? And it's really, so every 

    [00:55:46] Matt: one question Sarah asked, it was 50 Shane questions.

    [00:55:48] Sarah: Yeah. Shane found literally 12 toilets that he wanted to put in 12 different types. Oh my God. 

    [00:55:56] Matt: Anyway, we've gotta wrap this up. We, we are gonna get them back on it. We're [00:56:00] gonna get both. We should actually get both of them back on together. I wish both 

    [00:56:03] Hamish: of them. In fact, I reckon we should get Erin in as well and just ask her like how she managed to get to what she got.

    [00:56:09] Hamish: Honestly, it's a 

    [00:56:09] Matt: really cool project. We've just actually lodged it to a sustainability awards. I don't even know if I've told you that. Um, I really wanna champion this project. It's not just the fact that we did it as a collective. The whole idea is like, we need to prove this can be done and it can be done.

    [00:56:22] Hamish: Honestly, off the back of that project, we've then done cams and now I am seeing a huge opportunity. We've got two projects at the moment, which we're working with Cam and Erin. Doing almost identical to what you guys are, are, it's like your hemp creek house. You gotta 

    [00:56:38] Matt: set, you've gotta push boundaries in what is possible.

    [00:56:41] Matt: Yeah. Um, in this industry. And that was something that it's not pushing boundaries with an unlimited budget. It's building, it was pushing boundaries on a house that is a common Australian house that is leaky uncomfortable. Yeah. Unhealthy, moldy. And then it doesn't 

    [00:56:54] Hamish: have to be that way. And it doesn't have to be an, an exorbitant amount of money.

    [00:56:59] Hamish: No. And it [00:57:00] works. And it's proven because I have a client 

    [00:57:02] Matt: sitting here and on 

    [00:57:02] Sarah: the other end, um, it literally has reduced 99% of my utilities cost. Wow. No joke. Wow. I think I, I told you this last week. Yeah. I think you did by June. So first month of winter, my June's electricity bill was $13. Have you got solar?

    [00:57:22] Sarah: Yeah. 

    [00:57:22] Matt: And you had to, all you got, and that's including paying your fee, feeding tariffs in the worst month of the year for solar gain. 

    [00:57:27] Sarah: So no, no gas. Yeah. By electricity. Bill was 13. 

    [00:57:32] Matt: Let's leave it there. Wow. Let's let, let's leave it there. Sarah. It's a thank you very much. Thank you for being one Awesome.

    [00:57:37] Matt: With my loan. Awesome clients. Um, I can't wait 

    [00:57:40] Hamish: for you to be awesome with my home loan as well. Yeah, 

    [00:57:42] Matt: yeah. So, um, yeah, she gets you like one challenge. It's about 1%. She gets it down to 1%. Yeah. Right. Yeah. Um, does she chip in the rest? Yeah. Yeah, yeah. Yeah. Awesome. The baker is Sarah and Shane. Yeah. Crowdfund.

    [00:57:54] Matt: Thank you. And to get onto Sarah Best ways, how do we get onto you? You can either reach out to us, we can pass you on or off. Yes. 

    [00:57:59] Sarah: [00:58:00] Um, I've got a mobile email address, my website, which is ww dot w beyond-financial.com au. There's a contact page on there. 

    [00:58:10] Matt: Yeah. 

    [00:58:10] Sarah: Um, Sarah's on 

    [00:58:11] Matt: TikTok too, are you? No, she's not. Oh my God.

    [00:58:16] Matt: She's doing like mortgage broker dancing with on social. At social. 

    [00:58:20] Sarah: Not good. Um, I respond straight away all the time and even she 

    [00:58:24] Matt: does, and I mean, 

    [00:58:26] Hamish: even during contractions. 

    [00:58:28] Matt: Yeah. Yeah. So, uh, yeah, there's a, there's a, I respond during my contractions, um, but yeah. We'll, we'll put it all the links in the show notes.

    [00:58:35] Matt: Um, we'll, even, uh, if anyone, probably easy, if anyone wants to get on to Sarah her, reach out to me through my social media because we've got her details we can pass on really easily. Um, you can call at all times of the night because she answers. Definitely. Thanks. Um, thank you for coming on. 

    [00:58:48] Sarah: Thank you.

Matthew Carland
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