Financing your home renovations or new build is often a necessary step in making your dream home a reality.
So how can you get home loans that are sustainable and competitive, and what do you do if your land or project is seen as risky, or in a bushfire prone area?
Amy Beattie is a mortgage broker, and can tell us more about financing your home renovations or new build.
In this interview, I speak with Amy Beattie, Mortgage Broker and owner of Good Green Home Loans.
Good Green Home Loans is here to help you find the right home loan at a great rate – using only environmentally responsible lenders who aren’t using their profit and power to support the fossil fuel industry.
In this video, I asked Amy these questions:
- Do you find that by only offering home loans with lenders who don’t support the fossil fuel industry, it’s difficult to be competitive with the option you present to your clients, that they’re limited then in what they can choose from?
- How do you see people’s access to finance being impacted when financing riskier properties or projects in certain areas that are bushfire prone?
So let’s dive in.
Amelia Lee + Amy Beattie (Good Green Home Loans)
[Amelia Lee]: Amy, it is fantastic to have you here. I’m so excited to be introducing you to the UA community and for us to be talking about what you do and your incredible wealth of knowledge around this world. And being able to offer people insight into how they can get access to finance and the tricks around, I suppose, and the challenges to be aware of.
But also knowing that there’s options to seek financing for their home that is in more alignment with their values that they might have around the planet and lowering their environmental impact. And I just think it’s going to be super exciting to be able to chat to you.
So I wanted to dive in and just talk about that big picture business idea in terms of … Do you find that, because your business is focusing on lenders that don’t support the fossil fuel industry, that when you’re helping homeowners that it can be tricky to be competitive with what kind of packages you can offer them for their finance? And whether they’re limited then in their access of who … You know, it’s that thing of, ‘do I go with my values or do I go with the lower cost option?’ This is a big long term commitment, is it going to … You know, all that kind of stuff. Do you find that that’s the case?
[Amy Beattie]: The short answer to the question is definitely no. It’s not at all hard to remain competitive on price. And I have coverage of a large enough sort of panel of lenders that despite the differences between them all – and there’s big differences between them all – no matter which broker you go to see, in terms of their policies and their rules and what they will and won’t finance … That, having around 20 banks to choose from gives me more than enough coverage of the little different niches that sometimes you’re presented as a mortgage broker.
So no, the short answer is definitely not. The elephant in the room at the beginning of every meeting with a new client for me is the price factor. I guess when you’re making a sustainable choice in most things in life it’s almost guaranteed it will be more expensive. But there are some things that that’s just not the case and home loans is definitely one of them.
So yes, I think most people assume they’re going to get something a little bit more expensive. But the reality is that home loan is, ultimately over its lifetime, which is 20 or 30 years sometimes, it’s a variable cost. And that means you just have to be vigilant to not just assume that the price you got back 20 years ago is still great. And the ethical banks are as competitive, sometimes more competitive, and depending on the day of the week, I guess, because they change daily!
But no, you aren’t compromising anything. And to be honest with some really complex scenarios that I have come across, I’ve sometimes felt as if I might have to say to the client ‘look, I think we’re going to have to go down the path of a big bank’. And I’ll send… I’ll recommend someone who will do that, because I won’t. But it’s never ended up being the case. So yes, the coverage is good on all levels.
[Amelia Lee]: That’s so exciting to know. Because it is that thing… I often hear from members of my community that they’ve suggested to somebody that they want to make a sustainable choice, and they’re told ‘well, that’s just going to be more expensive’.
And so you do, you sort of set yourself up to always be willing to pay more in order to pursue the things that align with your values and make a difference in a bigger way. But it’s great that __ doesn’t necessarily have to be the case in what’s going to be probably one of the biggest loans that you ever take out in your life and yes, that’s awesome.
[Amy Beattie]: It’s one of the biggest financial outlays you’ll ever make in your life.
[Amelia Lee]: Now, I’m going to dive right into financing around sites that may have specific challenges or constraints. Because there’s actually been speculation around the bushfires that happened in 2019-2020 across the last summer in Australia, that insurance companies are basically not going to insure specific postcodes, they’re going to have whiteout zones, or they’re going to make the insurance of those areas cost prohibitive, so people just won’t be able to secure insurance.
And so, in terms of also looking at finance, I wanted to say if there was similar things happening in terms of people wanting to buy or build in these specific areas that are bushfire prone. And how you might have seen this potentially impact people’s access to finance for either building or borrowing to purchase land in these areas, and financing these riskier types of properties.
[Amy Beattie]: Yes. Okay, so there’s a couple of layers to that question. But ultimately, the biggest challenge, or the number one challenge you face when you’re obtaining finance for rebuilding or buying in a particular area is that you, no matter what that area is, you have to be able to insure the building as a condition of the loan with the bank.
So if insurance isn’t at the top of your list and making sure that it’s possible to insure, there’s every chance that by the time you’re ready and need the finance for settlement, that you’ll find that you’ll be … the bank will request the building insurance, policy and Certificate of Currency in the policy documents. And all of a sudden, the whole thing comes unstuck.
So you must be able to insure the property. And if you can’t, then you’re not going to be able to obtain finance. Unless the finance that you’re after is only up to the value of the land itself, and doesn’t rely on the value of the building.
So bushfire prone areas, one element that makes … Sorry, and the second element that makes things more challenging, and actually it’s not even specific to just bushfire areas, is the construction and renovation side of things. Which, you know, it’s a common belief that you’ve got the value of the land plus the cost of the project, that equals the value of the house on completion. And it isn’t a linear equation like that for banks.
So when you add in a bushfire prone areas requirements, as far as meeting Building Standards in order to get insurance, you add cost to the project that doesn’t necessarily equate or translate to value of the completed project. And that’s the biggest challenge. Because ultimately, the banks will only lend you up to a certain percentage of the value on completion of the property, determined by the market and sales in the area of comparable properties. And then, you know, you’re adding another layer to that then, which is: regional areas with limited sales, and it’s sort of a three-pronged challenge, I guess.
You know, overall what the banks do is they assess the entire project on every level, not just the value, But the client and their financial circumstances as a whole. So that’s all of those risks, not just the bushfire side of things. And if you tick boxes and you’re strong on every other element, but then you need to borrow 95% for the project… And you know, that’s 95% of the bank’s valuation, it can still be a very strong application.
So there’s the overall big picture that comes into the equation more so than just those initial three challenges. But they’re the big place to start, it’s … researching the market, knowing what properties that are comparable, to what you’re looking to have as a completed project, are selling for currently (so within the last six months).
[Amelia Lee]: Yes, that’s great advice. And I think one of the key things that we’re always learning, whenever we sort of start to understand one of those early steps in renovating or building, that the conversation with a broker and understanding the financial kind of sums and how that all stacks up is so key to you protecting your risks.
In terms of moving forward, often people won’t have the conversation with a broker until they’re at the pointy end of needing to get the money in their hands. And then they might find out that those valuations don’t stack and they’re coming up short. And I see that happen a lot for people who might have bought the land say 12 months ago, and then are now trying to come to get the construction loan to build or renovate, and they found that the values of the land have decreased, and they don’t have as much equity in the land as they initially thought, and they’re short and cash.
And so, it is that case of … It’s always wise, I suppose, to keep abreast of what values are doing in the area. And it is like you say, the construction costs might be increased, but that doesn’t necessarily correlate to an increase in valuation of the property, because that’s a market value process. So it’s great to sort of understand those layers of the things to consider.
And I do think it’s great that you’ve highlighted too that you may have a great case in three of the criteria, but the fourth falls over or something like that. It still can be a process that you can go through in terms of your feasibility as a potential borrower to the bank.
[Amy Beattie]: That’s right. And to your point, it literally means that the early you speak to your broker, the earlier you explain your full financial circumstances, the earlier they can give you the information you need to even potentially begin to mitigate the hurdles that you might face yourself, before the time comes that you actually need the money.
So yes, definitely the broker is vital, and at the beginning! Not when it’s crunch time and all of the emotions are behind it now, because it feels like it’s about to happen. Yes, it’s a journey and you’ve got to have, you know, the time, and get that finance side of things if it’s required, because you can’t do it without it! Understood well early.
[Amelia Lee]: Yes, definitely you must have very long term relationships with people, where you sort of see them and then it might be the securing the property 12 months later. And then it might be … sort of a very long love affair with a client to get them to the end result!
[Amy Beattie]: Yes, absolutely. And sometimes I feel a little bit like I’m the doom and gloom conversation. And you know, I’m having a lot of these at the moment but, you know… People who are coming to me early, and first time homebuyers, that generation who are a lot more … Well, with climate change being something that’s so important to them compared to the generations before them … Coming to me early about these things, and you know, it’s in my nature to warn them from the start about all the things that they have to put lots of time and effort into before they can’t turn back. And they before they’ve signed a contract, or gone too far, I guess. Yes.
[Amelia Lee]: That’s fantastic. And I think, it’s that ‘forewarned is forearmed’, and if you know the steps ahead, then it’s much easier to make them without falling in the pitfalls, and without getting yourself caught out. So it’s great that you can help work with a broker to get that kind of advice and support through your journey. So yes, that’s fantastic.
THIS IS PART 1 OF MY INTERVIEW WITH AMY BEATTIE, GOOD GREEN HOME LOANS.
This interview is part of our Rebuild + Build Better series.
Be sure to stay tuned as we share more information and expertise in helping you rebuild after bushfires, or build homes more resilient to climate conditions and in bushfire prone areas.
Resources mentioned in this video:
Get in touch with Amy here >>> https://www.goodgreenhomeloans.com.au/#