Forum Replies Created
So if understand you correctly, you refinanced to get access to an extra $2k, your interest rate went up from 6.57% to 7.40% and you had to pay the broker $3,300.
Not a very good result really.
Firstly, if the broker is ethical and a member of the MIAA (www.miaa.com.au) he/she must disclose his commission to you upfront. You should have known about this.
There is not much you can do at this stage. The refinance has been done and you have signed the loan documents.
I guess its not really the brokers fault as he/she didn’t know about the other loan so couldn’t advise you about that.
The disbursement details should have also been set out in the loan documents (i.e. paying extra $35k for refinance and paying $3,300 to broker).
Perhaps there are a couple of lessons to learn for the future.
1. Disclose everything to everyone and you can’t go wrong.
2. Read loan documents very carefully.
If you have spoken with Terryw then stick with him – he knows his stuff.
Sorry I can’t suggest a solution to this one.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auLenders rationale for reducing the LVR on high loans is because they are normally secured by higher value properties. As such the lenders consider the pool of potential purchasers to be significantly smaller for properties worth $800k as opposed to properties worth $300k.
However, NJ your situation doesn’t seem to make sense unless your using a smaller lender?
Who is the lender?
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auMy pleasure Del! [
]Yes, NAB made the most nonsensical decision I have ever had the misfortune of being part of. I don’t have any issues with naming them because their assessment was INSAIN!
That is good advice Del.
One solution is to use pre-approvals. This will also speed up unconditional approvals and minimise any problems. (I’m sure Scott S will agree)
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au“What goes around, comes around” – one I live my life by.
“A fool and his money are lucky enough to get together in the first place” Mr Gordon Gekko (Wall Street)
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi NJ
No. LMI policies are no necessarily the same with all lenders. It depends on the lenders policies and what risks they want to insurer.
Yes, you will probably have to pay LMI again because the lender would need to take out a new policy.
Yes, lenders will reduce the LVR if loan sizes start getting over $400k/$500k (or $700k in your case). It appears that you have the properties all under one loan. Not a good idea. How about trying to split the loans (thereby each individual loan is less than $700k (or $500k depending on policy) and mortgage insurance should only kick in if over 80%. I.e. have one loan secured by home and second loan secured by IP.
If possible take the lower value loan over 80% because LMI is calculated as a percentage of loan value. Therefore, the smaller the loan the smaller the premium.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Rob
Alana is correct. Not all lenders offer a “rate lock” facility. If your lender does not offer this then there’s not much you can do.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Maggie
Well done. ANZ LOC is very good. You can’t get a better rate for a LOC on the market (anywhere). Only St George and perhaps NAB will match the rate but your total borrowings have to be over $500,000. So it’s a good choice.
I would suggest taking advantage of the BreakFree package (ANZ professional package). It entitles you up to 5 mortgages without anymore application or ongoing fees. Therefore, when you purchase pay 20% plus costs out of the LOC and then take out a separate mortgage for 80% of the value. I would recommend using their Money Saver Investment Loan (the rate is also 5.97%). The minimum loan amount is $50,000. It allows interest only repayments and has no break fees.
Well done on making a good decision (many don’t).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auPerhaps. You could always give it a go.
However, the banks do make some savings by dealing with brokers. They save money on:
– Advertising.
– Sales staff.
– Admin staff (as we put the application together and in same instances enter the client’s details online).
– Brokers allow the smaller lenders into the market without them having to set up an office network, etc.Remember the banks aren’t stilly. They don’t just pay money to anyone without getting their pound of flesh.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi
4 units on one title can be an issue with some lenders. NAB will still do it at 80% and ANZ will do it at 70%.
The bigger lenders (i.e. Big 4) have a better capacity to lend in smaller areas (because the smaller lenders have to mortgage insurer all loans regardless of LVR). CBA will lend 80% just about anywhere (but they will not do 4 units on one title).
I would suggest trying NAB and ANZ (in that order) if you haven’t already. If they have declined then I would be very surprised.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Brizza
You have asked a very good question (and one that many people are probably wondering about).
I think my article which will appear in API magazine in Oct/Nov issue will answer your question. It’s titled Unlimited Finance and explains how banks assess loans and how the properties you purchase affect your borrowing capacity.
Its 2,000 words so probably too long to reproduce in this forum. In addition, API has exclusive use of it. Sorry, I’m not really helping.
Essentially the answer comes down to rental yield. If you finance properties at 80% then your yield needs to be over 8.8% for the property not to affect your borrowing capacity (and if you finance at 100% your yield needs to be over 11%). Therefore, if your average yield is over 11% you could purchase unlimited property (only from a serviceability perspective – obviously you need equity to secure the loans). Is this possible? Yes, I have a client that owns 19 properties and her yield is over 11%.
If you can’t wait for the article then you can email me for a more detailed answer ([email protected]).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auDon’t have much time but feel I have to respond.
1. Most IO periods are for 5 years. ANZ offers 10 years and St George offers 15. An indefinite IO period = LOC.
2. LOC are often a waste of money – too expensive. Normally only 1 out of 10 people that think they need a LOC actually do. You are better off (from a cost perspective) to use an offset or basic loan.
3. St George’s LOC is ok but too expensive.
– High ongoing fees ($10 per month, per sub-account)
– Break fees of $1,000 for 3 years.ANZ’s LOC is much, much better (higher interest rate discounts, less fees, no break costs).
I’m writting an article for The Australian about LOC’s and will let you know when its published.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Marty
It is a difficult question. In my opinion, it’s too hard to forecast anymore than 3 months ahead (a lot can change in 3 months). At this stage I can’t see rates moving at all for the next few months.
I think the banks became a bit optimistic and reduced fixed rates. Now that they have sobered up they are readjusting their outlooks.
But at then end of the day your guess is as good as mine.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auIn my opinion… interest only. The advantages are:
– You can make extra regular repayments if you like (subject to any product restrictions). Therefore you can make P&I repayments on IO loan.
– You can redraw any principal repayments (subject to product redraw).
– If cash flow gets tight then you can reduce payments to the bear minimum (i.e. IO).The downside is that some basic variable products do not allow interest only repayments (or they charge a higher rate for IO).
Just my 2 cents.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auThat’s a good point Del. There is a point where investors should buy insurance (i.e. fixed rate) to manage interest rate exposure/risk. This is something I definitely support and recommend.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Ange & Doug
Welcome to the forum.
If serviceability is an issue to rental yield is your answer. If properties are financed at 80% then you need a yield in excess of 8.8% for the property not to affect your borrowing capacity. If financed at 100% then yield needs to be over 11% (pretty hard but doable).
I have an article being published in Oct/Nov Australian Property Investor magazine titled “Unlimited Finance” which should answer most of your questions about borrowing capacity.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi M
Thanks for the question. It’s a good one.
I only had access to interest rate data for the last 10 years so my assessment does not take into account full economic cycles. However, if the data get too old then it starts to become irrelevant. For example, it wasn’t until the mid eighties (I think) when Australia started to “manage” the interest rate/cash/bond market. Since the RBA had actively managed this market (i.e. the RBA buys and sells bonds to manage the cash rate) they have become better at it. Therefore, there is some room for argument that interest rates will not return to levels of the early nineties (and before) because we now manage the cash rate and economy better (probably because Liberals are in power but I’m not going to enter into that debate). The long and short of it all is that I think that 10 years is a perfect time horizon to look at.
The reason I did that analysis is to support my hypothesis that lenders consider future interest rate movements when setting the fixed rates. If you choose of fixed rate solely based on the fact that you think you will be better off then essentially you are taking the opposite view of the banks (and their treasury and economics area – which includes the chief economist). Is that smart? Are you better at forecasting rates?
So I did the study and it essentially supported my hypothesis.
When completing the study I used the standard variable rate (currently 6.57%). However, you should be able to get a rate equal to 0.50% less than the standard variable. Taking this into account fixed rates look even worse (historically).
I once worked (in my previous career) with one of Australia’s top foreign exchange forecasters. He once told to me (I’ll never forget it) to forget about forecasting interest rates, foreign exchange rates, etc. Interest rates react to people’s expectations and uncertainly. How can you forecast expectations and uncertainty?
My advice is do not accept a fixed rate solely on the fact that you will be financially better off. History (and common sense) tells us that you will not be better off. However, perhaps at times you might be… but that’s probably only luck.
Anyway that’s just my view… one person. There are many views out there.
Anyone else care to share their view?
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auMy goal is to have the luxury to spend as much time as I want with my wife and kids (when my wife and I decide to have them).
Note the wording… as much time as “I” want!!! I say this on the basis that it is possible to tell the kids to go away when you have had enough. Is that possible?
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auIn my opinion:
1. Repair.
2. No. It is not an income producing asset at the time the repair is being made.Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Terry
I have had a similar issue with one of our client’s once. The bank did not register their mortgage! I think Davo’s right… things slip though the cracks (which is really surprising since the banks are always so savvy, efficient and professional… NOT!).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auInstead of talking about gross and net lets just talk about taxable income.
PAYG
Gross salary – work related deductions = taxable income. Let say this is $60k.Property
Rental – allowable deductions = taxable income. Lets say this is $8K.Therefore your taxable income is $68k. The tax payable on this is (excluding Medicare):
1st $6,000 = Nil
$6,001 – $20,000 = $2,380 (@ 17%)
$20,001 – $50,000 = $9,000 (@ 30%)
$50,001 – $60,000 = $4,200 (@ 42%)
$60,001 – $68,000 = $3,760 (@ 47%)
Total tax payable = $19,340 (average rate = 28%).As you can see only the additional taxable income over $60,000 gets taxed @ 47% so spending an extra few dollars to put you over $60,000 does not really change your position much.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
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