Hi guys,
im just starting out so go easy on me. I know nothing about real estate (except reading books) and went out and spoke with a RAMS mortgage broker who gave me the following finance:
7.27% interest variable rate.
300 annual fee
I/OSince i've only been to a couple of mortgage brokers, i don't really know whats good and whats not. I went to HSBC before and they weren't too helpful, looks like their interest rate is a bit higher as well.
Also, just wondering, is an interest only loan good? Doesnt this mean that i don't build up equity in my investment property?
Now, this question tends to bring up the question ' what are you going for, whats your plan.' i guess im a bit naive, but a CF+ and capital gains is what im looking for in an investment, not negative gearing, so will an i/o loan help? or will paying a interest and principal loan help more in that regards?If anyone else knows of a good mortgage broker that is understanding to a couple wanting to start out investing… please p.m. or reply here
p.s. i thought i'd get pre-approval before i start looking at houses.
Hi
7.27% is not the real rate when you take into account the $300 annual fee (this is a bit rich I would querie this as mortgage companies are looking for new business).IO is the way to go as you have more chance of being cash flow positive. It also frees up extra money to put towards your next ip or improvements to this one.
IO dont decrease the loan but you still get increased equity through capital growth (property doubles in value every 8 years approx)Your $300k property with $200 loan $100 equity becomes $600K PROPERTY STILL WITH $200K LOAN and $400k equity.
Pre approval is always a good start so you know your price rangeHave fun on the hunt enjoy the experience
Rudolph
Members Equity have 7.44 fixed for 5 years with no fees. I'd be fixing for alap.
one direct fixed 3 yr interest only loan
check it out
millions wrote:Members Equity have 7.44 fixed for 5 years with no fees. I'd be fixing for alap.ALAP? you mean asap? this brings me to another question.. do investors tend to use fixed interest rates or not?
Hi
Firstly, If i were you, I would not place all my trust in brokers because they are not entirely independent. Their recommendation is relationship driven and they often only recommend 3 to 5 lenders. Put yourself in a broker's shoes, do you want to know all the products from 50 lenders?
Secondly, if you are going for price alone, one direct has the best rate for smaller loan sizes e.g. for <$500k 0.86% off variable rates and no annual fees. The catch is no access to branches, which may or may not be important to you. For bigger loans e.g. $1m+, some of the major banks are discounting up to 1% off the standard variable rate
Thridly, there is speculation of an interest rate rise in July as housing activity has been strong in the last 2 months. This is evident in the rise of the 30 day bank bill rate (i.e. banks's cost of funding) in the last few weeks. Hence, may be worthwhile fixing, but cant guarantee you the rate movements out beyond the next few months as anything could happen to the economy
hey maxi,
Thanks for the quick reply. So basically they are all online- you cant go into the store and 'speak' with them, its all online? Thats fine with me, especially if it means less monthly repayments. and i just quickly saw that the variable rate is only 0.03% lower than the fixed interest rate- sounds like its definately worth a go, its unlikely that interest rates will decrease in the next 3 years anyway.
Thanks for the tip!
also, one question. is it right to assume that apartments tend to not appreciate as fast due to the fact you dont own land? does that make appartments not that great unless you get a really good offer?
ah, also i forgot to add, do most mortgage companies allow the cost of the mortgage insurance to be added onto the loan, or is it an out of pocket expense?
No probs – in terms of one direct, it is online and over the phone. It is good because it is ANZ's subsidiary, so in essence you are dealing with a major bank but just dont have access to ANZ's branches and other financial products
Hard to say if rates will drop in the next 3 years. Just a thought, what will happen to Australia's economy once the 2008 Olympics in China is finished and demand slows. Australia is heavily dependent on China
In relation to your second questions, i tend to agree with you
With most banks, LMI (mortgage insurance) is capitalised on top of your loan, so if you're strap for cash, it's basically added on to your loan
alap – Sorry, got lazy. As long as possible, and Asap also.
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