Putting More Money Back in YOUR Pocket, with Toni Mladenova from Yard

What if you could save thousands of dollars EVERY YEAR by doing just ONE thing?

Yep. For real. 

I'm talking about your mortgage rate. 

Think you've got a great deal? 

Hmmm, there's a few things to know...

This interview is the first episode where we get to go behind the scenes and get some MASSIVE insight on big banks confusing mortgage products PLUS what those big banks don't want you to know.

I'm chatting with Toni Mladenova (Co-Founder and Director) at Yard Home Loans and lifting the lid on the most-asked questions, plus busting common myths.

You're going to want to tune in to this one... we're putting more knowledge and power (and ultimately more money in your back pocket).

Find out more at www.yard.com.au 

xo
Simone

Listen in here, and where you get your podcasts:

Prefer to read the transcript?

Simone Mercer Huggins:
If you want to keep on and make more money you're in the right place. I spent over 10 years learning from the most brilliant minds in money, wealth, and investing to take myself from 20 K in debt to a seven figure investment portfolio. Join in. As I share the secrets towards growth, money investing and ultimately freedom. My name is Simone mussel, Huggins, and welcome to ms. Wealthy's. Kiss my money.

Simone Mercer Huggins:
Welcome back everyone. To another episode. My name is Simone and this app it's been awhile since I've brought on a guest. And I know a few of you are really excited to hear this app because I am interviewing Tony, which is the co founder and director at a new lender, essentially, an online, only lender in the mortgage space. And it's really exciting because we're going to go behind the scenes and give you the information so that you can put more power and more money in your pocket, which is all what we're about. Right. So welcome onto the show. Tony, thank you so much. Hello everyone. So I'm going to ask you some quick, rapid fire questions before we get in which I ask everyone first one, where did you grow up? Um, I grew up in Bulgaria. Okay. Which is, hence your accent. Uh, favorite quote.

Simone Mercer Huggins:
Um, okay. I love motivational quotes. So probably my favorite quote would be, uh, do or do not. There is no try so good. Yeah. Whenever that comes up in my fate or whatever, and I'm reminded of it and it's like, yes, just stop. I even say that in some of my language, like, I'll try it. Just do it name one thing. You love spending money on a beach holidays. Same. And finally, what does money mean to you? Um, to me, money is freedom. It's really the freedom to just be able to go and do whatever you love. Yeah. And buy back your time, right? Yes, absolutely. Yeah, totally. A hundred percent perfect answer. Um, okay. So obviously when we met last week, we started chatting about doing an event next year and like some really exciting stuff. But then after we started talking, I remember even like sitting in the room and I was like, you know what, everything that we are talking about right now needs to go on this damn podcast, because everything you're saying is just like, like we need to open the lid on this. And you're like, get behind the scenes when

Toni Mladenova:
It comes to the big banks, especially when it comes to mortgage lending. So

Toni Mladenova:
I know that

Toni Mladenova:
For some people like feeling like having an online, only bank or even an online, only lender, which yard is, uh, can be a little bit kind of, it can feel risky or scary. And we're going to talk about why that's absolutely a complete myth, but why don't we start off by telling you like how yard was bought? Like how did it even come about? How did it, how did was yards started? So I guess maybe it will be useful. Um, if I just spent, you know, 10 seconds actually just telling you what yard is and what yard is about Toto. Um, so as you mentioned, Yardi is one of the new kids in the block. So we are a new lender and we specialize within the mortgage space. So we present ourselves as a Smith specialist, mortgage provider, and we are absolutely obsessed with designing innovative mortgage solutions that are simple, transparent, and very price.

Toni Mladenova:
And we just want to make the home loan experience better for people. Although we are a new provider, we actually have a pretty broad proposition. So if you think about all of the different circumstances in which you can consider a home loan, so, um, you know, we can help you purchase a property or we can help you refinance an existing property. Um, we offer loans for renovations as well as ground up construction. Um, and we can also provide bridging loans if you need to buy before going through the process of selling an existing property. So there's kind of a pretty broad range of circumstances, um, that we can set up. So your question was, you know, why, why was y'all, you know, how and why was he out born? Um, and I really want to talk about what really motivated the team to go on this journey.

Toni Mladenova:
So the, our journey started in 2017, some days it's probably now, uh, three years ago. It's been, it's been some time is taking this time to get here. Um, but what really motivated us is that we found that consumers find it difficult to understand home loan products and, um, quite often, you know, they actually need to bear the cost of initial inefficiency within the financial services system. So, so just, you know, going back to the point that, um, consumers are really confused. Um, we really like reading, uh, different surveys and we came across a survey, um, conducted by UBS and it showed that up to third of borrowers, um, who have an interest only loan might not realize that they actually have an interest only loan. No, yes, yes, yes. I don't even know. Yeah. So they didn't realize that they have an interest only loan.

Toni Mladenova:
So, I mean, obviously, um, you know, we were really kind of shocked to hear that because I mean, as, as you know, if you're in an interest only loan, you know, there is a period, um, in which you actually don't make a repayment was the principal of the loan. So you're actually not paying down the loan. Um, and then secondly, at the point, your interest only period, expires your repayment, uh, you know, will increase because at that point you'll need to, um, also start making, um, principal repayments. So, um, you know, um, so we just thought that that's really disturbing. Um, we just thought, you know, that's actually really important and we don't know why people are not aware of this. Um, so we thought, well, you know, actually what we attributed it to ease, well, actually the whole landscape and the whole industry is very complicated and we feel that it doesn't need to be that complicated. Um, we want to create, um, an offer and a proposition that's very simple and, and transparent for people to, um, to understand. Yeah. Okay. So that was kind of, you know, just taking kind of this real perspective about, you know, homeless and finance. It doesn't really need to be complex. It's something that we really, really want to change. And in the process, um, seek to, to streamline the offer, which obviously can, um, uh, result in a low interest rate, um, for our customers as evidenced by our interest rates.

Simone Mercer Huggins:
Okay. So what, so that right is obviously very competitive, um, which is 2.09,

Toni Mladenova:
Is that right? So, um, so our, our rates at the moment start at a 2.9, 2.91 variable rate per annum, which translates to 2.9 for comparison rate.

Simone Mercer Huggins:
Yeah. Okay. All right. I'm going to stop you there because what the, this whole comparison, right. I feel like there is so much confusion around this. I used to think, I genuinely used to think before we even bought into property. Um, and you know, before I even kind of knew enough about home loans when I saw the two rates, I didn't understand. And I thought the comparison rate actually means competitor, right? Like what they comparing to their competitors I've since found out that's not true. Do you want to talk about that in case anyone else also has that view?

Toni Mladenova:
Yeah. Yeah. You know, um, I mean, actually we have a lot of people that come and ask us exactly the same question and they think that the comparison rate is actually a competitor. Right. And we it's like how we to competitors. Yeah. So comparison rate actually stands for something different. Um, so as you probably know, whenever you apply for a home loan, um, you're given an interest rate, but then I'll guess what, they're also all of these different fees that come with a comparison rate. So what the regulator has gone out and said as well, um, you need to be able to actually tell customers the true cost of that loan in a matter where they can easily compare it without a propositions because, um, you know, the level of fees might be different and then the percentage rate might be different. So, um, so there's actually a methodology used to calculate comparison rate. Um, so what do you assume is alone of $150,000, um, over a five year term, and then, um, you, um, add on the associated ease to the interest rate, um, to arrive at a comparison rate. So that's why often, you know, uh, the comparison rate is actually higher than the actual interest rate advertised, um, because that factors, um, applicable fees. Okay.

Simone Mercer Huggins:
And so the comparison rate is what you actually pay.

Toni Mladenova:
Uh, the comparison rate is what you actually pay expressed as an interest percentage. Okay. Um, so, um, so for example, um, um, our 2.91 rate, um, whenever you get a home loan with yard, there is $150 settlement fee. Okay. And at the point you, um, repair your loan or you refinance away from yard. Um, we need to do some work, um, around legal documents and, uh, we charge a discharge fee of $500. Um, so the difference between the 2.91 and the 2.94 is that the 2.94 actually includes that hundred and $50 settlements B and $500 discharge fee expresses an interest percentage.

Simone Mercer Huggins:
Got it. Yeah. So I mean the different, cause obviously it's such a tiny difference between 2.91 and 2.94 with your actual right. In comparison. Right. But when you look at the big banks, they're in the difference between the actual right. And that comparison right. Which is what you end up know,

Toni Mladenova:
Coaster paying or whatever,

Simone Mercer Huggins:
Being like literally the difference of one and a half percent, which is

Toni Mladenova:
Yeah. So, um, I mean, what could, there are a couple of things that could explain the difference between, um, you know, the actual rating, the comparison, right. So first of all, is, um, the associated fees, obviously, you know, we just, and then the other thing, um, that, um, you need to be aware of is, um, let's say you have a fixed rate loan and you have fixed term period of, um, three years. Um, and then you're given a fixed rate interest rate. Um, well you need to ask your provider as well at the end of this three year term, once my fixed rate expires, what does my interest rate actually revert to? And, um, um, in a lot of the instances, unfortunately, um, what's your kind of current and financial institution would do is we'll revert you to a, not very good interest rates at the point of your fixed rate expiring. Um, and that would be reflected into the comparison rate. And it's something to be always mindful of, especially if you're going for a fix. Right. Always make sure you ask that, you know, you ask you institution, what am I going to revert to? I'm at a point where a fixed rate period expires.

Simone Mercer Huggins:
Hmm. Okay, good. All right. And so talking about these rates, you know, obviously covering the basic questions like with your variable rate, is your fixed

Toni Mladenova:
And does it differ with

Simone Mercer Huggins:
Home ownership or investment property?

Toni Mladenova:
Yeah. So, um, you know, you know, whenever you ask me what our rates are and I started by saying, well, our rates are from 2.91 variable per annum. Um, so the reason why I say that is because there are a number of factors, um, that determine your interest, right. Um, so the key variables, um, for yard are, um, the objective for you buying the property. So whether you are an owner occupied, whether it's your own home or whether you're an investor that will result in a different, in a different interest rate, um, where the property's located. Um, so, um, you know, whether it's in a Metro area or in a more regional area, um, employment status also plays a factor. Um, so whether you are pay as you go employee or you're self employed, and then of course your credit history, um, so, um, each one of the factors has an impact on your interest rate.

Toni Mladenova:
And then, you know, going back to the point around transparency and complexity, uh, because there's so many different factors that can impact your interest rate, it gets confusing for consumers. So if you actually go on our website, you know, we've done a little widget, um, that you can use and just answer three to four questions and actually understand what the applicable rate is, um, rate is for you. Um, but going back to your question on variable or fixed, um, yes. Um, you know, variable, um, you know, uh, whenever we talk about fixed rates, they're also different and they differ by the period, um, for which you would like to fix your rates, or whether it's a one year rate, a fixed rate two year, three year or five year fixed rate term.

Simone Mercer Huggins:
Right. Okay. Got it. Alright, cool. So actually you touched on something before and I want to come back to that. You kind of mentioned obviously rights, determine based on a couple of things, employment, where it's, where the property is a list of stuff, plus credit history. So a question that's come up before is if someone applies for alarms and then gets rejected or not rejected, or, um, or, you know, goes online and just applies, but doesn't

Toni Mladenova:
Use it. Does that hurt your credit score? Yeah. Um, that's a very, very good question and something that there are a lot of our customers worry about. So, um, it really depends on the process that the lender undertakes. Um, so I would describe how the process works with us. So, um, at the point the customer submits an application online, uh, with us. The first step that you do is, um, a loan, a loan consultant reviews that application, and, um, has an initial conversation with the customer to do what we call, um, a preliminary assessment. So that's the point in which you just, um, gathering issue information about the customer to understand whether the customer feeds, um, our policy and they can borrow demand that they're seeking to borrow. Okay. And, um, you know, the loan consultant, um, that a customer has a conversation with, um, you know, is across our credit policy. Um, and they kind of provide an initial, um, high level assessment of whether if that application was to proceed, whether there will be success successful when, um, assessed by credit, um, either along consultant things that for whatever reason that customer is not going to feed, um, our policy, um, they would recommend that the customer doesn't proceed with a formal application and at this stage, um, there, um, there wouldn't be, um, impact on credit history because just an initial kind of high level preliminary conversation.

Simone Mercer Huggins:
Okay. Got it. Okay. You can find out, you know, enough info without it actually affecting anything.

Toni Mladenova:
Yeah, no, no, absolutely not. So, um, uh, we are very, um, so, so the point your credit history gets impacted, um, is whenever, uh, you know, uh, we actually check your credit report. So the point we check your credit report, um, you know, it marks as an inquiry. So you apply for, um, for any type of credit really. Um, then you can see that somebody has made an inquiry on your credit report, which, and your assumption there is that you have made an application, um, without lender for a loan. And, um, that has impact, um, on, on your credit score.

Simone Mercer Huggins:
Got it. Okay, good. So you can rest easy and know what rate can kind of shop around to the degree that you need to before you actually need to go any, um,

Toni Mladenova:
Yes. I mean, um, you know, again, you know, you can, you can just, um, kind of, uh, call up and have, uh, a preliminary assessment conversation. Yes.

Simone Mercer Huggins:
Yeah. Okay, good. Alright.

Toni Mladenova:
So then the other thing

Simone Mercer Huggins:
You mentioned just before, and I want to bring this out because we spoke about this when we met and it blew my mind and I didn't know, and I feel like it's something that a lot of people also don't know, you spoke about something called essentially like bartering for the best, right?

Toni Mladenova:
Meaning that if you're just a really good

Simone Mercer Huggins:
Negotiator at some of the big banks, for example, that you could just get a better rate, but the person next door to you that also might have a home loan with that same bank might just happen to be on a whole lot better rate because they were better at negotiating.

Toni Mladenova:
Yeah. Yeah. So, um, I'm, I'm not sure if you have done this, but if you go on, um, I'm not, um, I'm not going to generalize and say that everyone in the market does this, but if you go to the website of selective major bands, for example, there are advertised interest rates, but they are what they call standard variable rights. Um, the reality is, is that no one is actually on a or many people are not on a standard variable rate, but they're on a different standard variable. Right. Um, and then the realities is, is that, um, you know, different people are in different rights and I'm not sure, um, you know, how exactly to explain why people have, uh, have different rates, um, you know, different brokers would have access to different office. Um, if you walk yourself into the branch and have a conversation with your relationship manager, you're going to actually get a different rate. So the element of transparency is actually not there. Um, which is what we, you know, we're trying to really change, um, in a way that if you go to our website, um, you know, this is what the rate is, and we're going to give you our best offer up front. So, um, but that also means that, you know, we have some customers that try to negotiate with us. Can you make a better deal? Well, we tried to say like, well, you know, we think that we have a pretty competitive rate and we advertise it and the rate is what the rate is.

Simone Mercer Huggins:
Yeah. Right. So there's no like bartering on negotiating or you might be able to get a better deal, like everywhere else.

Toni Mladenova:
Yeah. Which is, which to me is a more peaceful

Simone Mercer Huggins:
Kind of, I don't have to worry about, you know, walking out and going, Oh God, did I just leave money on that?

Toni Mladenova:
Yeah. Um,

Simone Mercer Huggins:
The other thing he spoke about iPhone, I find this confusing as hell is so many of the big banks. And, and this is actually part of what was looked at with the Royal commission that just these insanely confusing products around lending, particularly when it comes to lending of the names of stuff that you get is just, yeah.

Toni Mladenova:
Yeah, yeah. So there are a lot of, yeah, there are a lot of, um, products out there that have very, um, exciting marketing names. Yes. You know, but that do not necessarily, um, tell you much about the product. So the way we think about our products is just in a very simplistic terms, you know, we offer a home loan, um, and then there are a set of features that you can, you know, add on, um, to your home loan. Um, but it's just, it's just a home loan at the end of the day.

Simone Mercer Huggins:
Yeah. Not confusing wealth package with something added. Yeah. Yeah.

Toni Mladenova:
Okay. So, um,

Simone Mercer Huggins:
I'm going to ask you a question that one of the women in the kiss homeowner Facebook group asked, and I feel like it's so on point, not only because it literally comes from, you know, the voice of someone who wants to get a better ride and literally wants to save thousands of dollars, but her question came up around, okay, hold on. You're not a main bank, so is it actually safe? And I feel like this, she's not alone in her asking that question because this like whole trust factor around, maybe because it's online only, or maybe because you've only been around for a couple years, or maybe because, you know, you're not backed by like a quote unquote major four bank or whatever. Can you talk to that because I kind of didn't really understand how a lot of the lending works behind the scenes in terms of trust factor and like how, you know, your back in terms of your actual home loan.

Toni Mladenova:
Yeah, absolutely. So, um, let me first start by saying that, um, YD is an independent institution and, um, we have no association with, um, you know, a major bank and we actually quite proud of that because, um, we believe in the need in Australia, um, to promote competition within the financial services sector. Definitely. And, you know, the only way to do that is to have, um, you know, new organizations entering market, creating that competition, which ultimately results in better outcomes for customers. So, um, and we, and, and then the other point is that we're not a bank. Um, so, uh, we are a lender. Um, I guess one of the terminologies used in the industry is a nonbank lend up, um, independent non bank lenders have existed for a really, really long time, um, within the industry. Um, so, um, um, I mean, to give you a couple of names, um, that are absolutely fantastic institutions, uh, loans that condo to you have been around for a really long time, you know, pepper money, um, the, uh, latitude financial.

Toni Mladenova:
So there is, you know, there's a great number of non bank lenders, um, that have fantastic, uh, testing propositions, um, in terms of, is it safe? So, um, so obviously to be able to, um, operate as a lender in Australia market, you need to be licensed. Um, and, and you are actually a regulated entity. Um, so yard, um, home holds an Australian credit license and, um, we, we are bound and we abide by a number of apps and regulations such as the national consumer credit protection act and the privacy act. Um, but I guess the question that's really interesting is, um, what happens, you know, if yard is no longer around, right? So you go and you get alone, uh, you know, yard, and then the question is what happens? You know, what is the associated risk? Um, and I want to answer this question in general, and then, um, more specifically about yard.

Toni Mladenova:
So if you think about a home line, um, or any loan, really, um, it is an asset for the financial institution and, um, like most assets, um, it can be sold. So, um, if for whatever reason, you're with the lender that is now no longer around anymore, um, the most likely outcome is that, um, your loan actually gets sold to another lending institution, right? So, so what this means, you know, for your personal situation is that, you know, you do not lose your home or anything like that. You just get another lender. Um, and, um, you know, in the majority of the situations, there's actually no change to your loan agreement. It's just, you know, the line of Yolanda is different. Okay. What happens in the specific case of yard? I mean, you know, um, the business, you know, is doing really well, and I hope that we have run for real real time. Somebody is asking the question, um, if something happens with yards, um, and you have a home loan with yards and we're not allowing anymore, you continue to be, um, a customer of our wholesale, um, funding provider. And there is no change to your, uh, to your loan agreement. So just kind of the name of your lender is different.

Simone Mercer Huggins:
Got it. Is it kinda like I might be, I CA I might be making the completely wrong analogy here, but is it kind of like in the insurance industry where basically there are like, you know, 30 different insurers that you can go to and get an insurance quote for whatever your car, your home, your blah, blah, blah. But really when it comes down to it, there's basically like four main backers and all the insurance basically comes from those four main people. Is that kind of what it's like? Um, look, I'm very familiar with you. Uh, but yes. So yes, there, there, there are a few institutional funders in the market. Yes. And a lot of actually access, uh, funding from, from these places. So yes, probably be association is, is similar to some extent. Yeah. It's not like there's a hundred different actual lenders that have their own lending, like do it and it's yeah, got it.

Simone Mercer Huggins:
Okay, good. Okay. I think that, like, I feel like that that kind of helps to put a lot of the fears aside of like thinking, is it safe and how am I going to lose my home? Or like, whatever. Um, cause I, you know, I know that comes up and we spend so long, you know, not mentioning any names, but when you have the dolomite account, when you're in school and you grew up thinking that like you, you know, there's, there's a trust factor that's built over years that the big banks obviously spend millions of dollars to build so that you have this truck's factor so that you don't leave, um, so that they keep your thousands of dollars instead of you keeping it. Um, which, which I know is, you know, and, and it's so hard because so much of the financial, so much of the financial sector is plagued by, um, distrust and it's for a reason because, well, we had the Royal commission for a reason, like the big banks just hiding so many things from consumers that just blindly trust, I guess.

Simone Mercer Huggins:
Yeah. Um, which is scary. I mean, what, what, um, what I just want to say is that, um, you know, I hope that, you know, listeners to this podcast, um, really consider, um, you know, alternative providers in the market, not necessarily beyond, but you know, there are other, um, fantastic online lenders, um, um, within the homeless space, as well as kind of, uh, most of the other financial products space, but, you know, just, um, you know, just take a look, you know, he, he's not always with a major bank. Yeah. Um, uh, really great propositions as well. Yeah. And I feel like it is, I feel like it's, you know, there's obviously the admin kind of factor and the time factor, but honestly like, and sometimes you get hit with switching costs. So like, um, cancellation costs or whatever, and, you know, full disclosure, everyone knows I'm super transparent with all of my stuff.

Simone Mercer Huggins:
And you know, there's no association between yard and ms. Wealthy or anything like that. But I am literally, we are literally looking at yod to completely re finance because we are not on that this rate, uh, we are not sub 3%. Right. And even though we'll be hit with like a, I don't know, even know like a $500 fee or something for leaving our current home loan provider or sorry, investment property for rider on our loan, it's still worth it because we will literally be saving thousands of dollars. And so if we can, and that's just in one year. Yeah. Um, so I just, you know, I just, it's literally the fastest way, like people, when people say to me, how do you know, how do you do the small things? Like whatever, like, would you shoot grocery bill or reduce your electricity bill? And I'm like always focus on the big stuff.

Simone Mercer Huggins:
How can you cut out the major things like don't focus on, you know, getting a slightly better savings rate for your $20,000 sitting in the bank, no focus on shifting like your two, three, four, whatever, $500,000 loan by at least one and a half or 1%, or even half a cent. And that's where you make the massive gains. And then it doesn't matter if he's spending $50 a month extra on groceries, like, um, you know, whatever, um, yeah. This is where you make the money. And everyone knows, I talk about compounding so much, like when you understand the impact of compounding and what that means over time, like we are talking like tens of intense, if not hundreds of thousands, because most people, what do they do, they take out 30 year loans or 20 year loans. Right? Yeah, exactly. So, yeah. So whenever you're thinking about refinancing your mortgage, um, they are, um, fees and charges, the other encourage, um, in this process, um, which could be linked, uh, both to your existing lenders and, you know, there's some government charges associated with the switch, but the way you should think about is, you know, um, what is the remaining term, and then you have on the home loan.

Simone Mercer Huggins:
And then, um, just think about the saving, um, in, in the interest saving over the term of the loan. Um, and you know, quite often that's quite a significant number. Yes. Yup, exactly. And I think, you know, focusing on that massive number rather than the immediate tiny pain of the switching costs or the cancellation fee or whatever it is, um, cause even what I was shocked about and I, and I, I feel like I almost forget it every single year, but which are the $300 just for the privilege of having a home loan every year, every year it comes up and I'm like, what is that fee? And I always forget it, but I'm like, what am I even paying $300 for? Just like, yeah. So when it's that kind of difference, it, it, it really, it seriously adds up. Um, okay. So I think I have asked most of the questions that I wanted to ask.

Simone Mercer Huggins:
Is there anything else that I have not copied? Um, look, I think we covered, um, you know, um, the key points, um, I mean, I would love to answer any questions that come from any of your listeners as a, as a follow up or, you know, you can always just shoot me an email. Yeah. For sure. Well, what I'll do is not only will I put your info, so obviously the best place is to go to yahoo.com that are you right? Yes. Um, so I'll put that in the show notes too. Obviously it's super simple to remember, but that handy link and what we'll do is I am going to bring you on, into the kiss, my money Facebook group, and let's do a live maybe next month or in January and 2020 just to pull people on because sometimes these things take awhile to sink in.

Simone Mercer Huggins:
And, you know, sometimes even for those that are new, particularly because I know it's an exciting time for a lot of buyers at the moment with homeowners being at historic lows. Uh, and you know, when you enter the process of buying a property, it's always, it's, it's more the case of you don't know what you don't know until you start the process and start asking these questions. Um, so we'll do a live and ask, you know, get more questions asked in there, um, coming up. So for those that aren't in that group, I will also put the link in the show notes too. Um, but thank you so much for coming on. I'm so glad that we could do this and pull down some of the myths and also get behind the scenes on, you know, lending, um, particularly on something that so much of the population, uh, I think doesn't know about the pleasure was, was mine. Um, and you know, thank you. So thank you so much for having me. Yeah. Amazing. All right, bye. We'll talk to you. Same. See you soon. Bye bye.