Mmm,
The NAB and Westpac seem to be the most competitive with fixed rates atm, and from looking at each majors interest rates, I notice nab have just done the oppostie of what this thread mentions with the variable/package rates….and this week reduced their 'package' interest rate discounts further. ) 0.6% disc now from svr for $100k-$250k loans, and now the full 0.7 for $250k plus loans – no haggling required!  And check out the 2 & 3 yr fixed rates!. I cant help wondering if next week others will reduce the fixed rates further – and how many people will lock in this time – or be 'greedy' and see if they get even lower. I still reckon for an IP, if a 4 or 5 year rate ever gets to starting with a '5' it would make sense to 'go for it'.
Regardless,, the 'on line' style deals/lenders now seem to offer very little if any discounts from some of the major bank deals – and possibly the best thing to negotiate to save $ with now is an application fee – or if you are really good – a package fee discount/waiver for the first year maybe! Although not a common thing with any of the 'big 4' atm.

Times they are 'a changin.

Cheers

Hi Yopoli,

WHile the delay may not be good, bear in mind a lot now are only honouring any quote for a week maximim – and by the time you had new loan docs prepared, and executed, and returned, that is well over a week – and rate would be different again,

The  lender may be being inundated with these requests, but ideally you shoudl certainly not have to wait a week for a reply.

You will notice fixed interest rate loans with most if not all lenders vary from week to week, whereas we only hear about 'standard varaible rate' on the news etc – so the economic/exit costs do fluctuate.

Most lenders will have a brochure explaining economic costs, and many have updated info on their websites now to assist with explaining what is a tricky and sensitive topic.

As already mentioned – sit this one out….and look long term.

Cheers

Hi Clareow – welcome to the forum.
As Terry has mentioned, it all depends on how much money you have 'sitting around' as to how an offset account may work for you.

I assume when you say you have seen 'One direct on line accounts' you are talking about the actual homeloan, and not their savings accounts? (unrelated)

The easiest way to work out if an offset account will work for you is by understanding how it works.

You have a savings account, that is associated with your homeloan, so that the daily balance of your savings (the offset) account,  offsets the days balance on your homeloan, effectively reducing the interest you are charged, and more of your payment goes towards the principal of the homeloan that way.
The negative, is tha most lenders only offer true offset accounts on their
standard' loans, which unless included as part of an annual package arrangement, to get a disocunted interest rate also, will be at a higher interest rate than a basic loan, such as the one you mentioned.
If you pay all your income into your offset savings account, and then pretty much empty it as soon as it goes in, it will not work for you at all.

An example to help, would be lets say you 'average' a daily balance over a calender month of $2000 in your account (many folks liekly will not average this either……)

aasume your loan is 6.7% interest, calculated daily, the offset account homeloan will save you $2.50 per week in interest….

Lets say your loan was for $200k – if you had it as part of a cheaper interest rate loan, at say 6%, with no offset account, you would save almost $27.00 per week in interest. So in this case, the cheaper loan is far superior for you.

OBviously it works out differently if you had a higher account balance, and the interest rates were 'closer', but hopefully that gives you an idea.

If you had $50k lying around in your offset account, it is the same efect exactly as if it was 'in' the loan, but obviously has the tax benefits already mentioned above, and allows for greater flexibility if your circumstances change.

where an offset account is perfect, if your interest rates are similar with or without, is that you would  have all income staying in your offset savings account for as long as possible, live off a credit card for the interest free period, and then pay it off in full each month from your offset account, and then start the cycle again – this will save you interest over the life of your loan, and thus shorten the loan term on a principale and interest homeloan..

While I think of it, I notice a few lenders on their websites or blurb (non bank/non deposit taking lenders) talk about their loans having 'loan offset' – but this is very misleading – all they mean is you can 'offset' your interest by putting more money into your homeloan – doh – genuises! Dont be confused with that…..

all the best with your new home.

Cheers

Hi Glassy – welcome to the forum too….
More than happy to give you a bit more info.

Dont take it the wrong way (please) but I must reiterate, that if rates were still rising, or had levelled off, you would be happy I'm sure. And…..possibly you would then not be able to afford the $500k now you are looking at for your new house.

What the lender has offered you, keeping the exisitng loan, and then getting another as a variable is the best way to go, and of course you can average out the two rates in a sense for your true rate on the whole $500k.

Can I put the scenario back to you, that if as you say you cant afford the loan, but if it was @ 5 or 5.75% you could, do you realise that if you did have the whole lot fixed in for a few years, and rates had gone up (which they will again I'm sure in the next few years) when your loan comes off the fixed rate, it will go to the standard varaible rate at the time, which then may be 7.5% as an example, or even higher – if you cant afford that rate, you have to sell (lose your home) or live very frugally……..at the moment lenders are still assessing new homeloans at a much higher 'rate' than the actual rate, simply for this reason, to make sure people are not over committed Glassy.

Unfortunatetly, you wont find a break cost like this waived, as it is one of the few actual costs not actually 'made' by the bank – ie the bank or lender actaully has to pay that amount of money (or it costs them that amount of money) if the lan contract is broken.
It is a contract – and based on the assumption that whoever lends the funds will get the money all agreed on. 
I guess it is like a car lease – if you want to pay a vehicle lease out early, you still have to pay the whole amount as if you had made all the repayments.
I know it sounds like a lot of money, and it is a complex process to get your head around, but essentially fixing a homeloan (I have one fixed loan, and am about to do another) should be done purely as a way to aid your budgeting, or if you are comfortable with the rate of the day, as opposed to the risk of it rising – fixing a loan to purely try and 'beat the market' will more often than not backfire.
Rmember how long you have your home loan for – and try and look long term, not just at these 'record low' rate at the moment.

If you simply must have your new home, I have a suggestion or two.

Perhaps look at the option of having the extra variable loan as interest only, and then any extra you have pay of the fixed portion instead. This will save you interest, as you will be paying less at the higher rate. Most lenders will allow you to pay some extra off your fixed loan without penalty.
Also, use an offset savings account with your new loan, and make sure all your pay, income, etc gets paid into this account, and left there for as long as possible, to minimise the interest you pay on your loan.
The only other suggestion……..cheaper house!

All the best with whatever happens!!!

Hi Marie07 – and welcome to the forum.

It sounds painful doesnt it? altough just imagine how you would feel if rates were now 9.9%…..
While that was quite a high rate to fix in at, its all relative.
Couple of things that may assist with decision making.
1) Is it your own home, or an investment property?
If your own home, unless you fix it in again at the new low rates, or rates go down again, and stay down for at least the next 2 years or so, you should really perhaps just keep paying, and take  it on the chest. That sadi, most good lenders allow you to pay extra of a fixed rate loan without penalty up to a certain amount. Why not look at doing that? Even though your repayments wont go down, you will be paying more off your principla, as you will be being charge less interest. Many lenders allow a certain amount extra annually, or over the fixed term. If you have extra money, maybe try that.
2) If an investment property, while it may be a deductable expense, (the exit/break coss) remember as your interest is tax deductable, it does not necessarily give you the same 'in pocket' benefits to get out of your loan, as if it was your own home (and thus not a deductable expense).

Try and be objective, and as already mentioned, to the sums before you flush money on break costs that may be better spent elswhere at the moment.

Cheers

Terrys example is text book perfect – explained 100% spot on, and unfortunately occurs daily………………….a great reason why anytime money is borrowed for property, you really need to look at what you want to achieve, and your  l-o-n-g  term goals/plans prior to making a committment.

Cheers

Hi Tim,

I guess it will be the majors only that balance sheet lend – which at the moment is LVR<60% for lo doc borrowings.

Its a real shame for those with genuine need, that could service a loan, and do have income, but I know from what I have seen from a couple of 'confidential internal memos' myself , that there is a significantly higher default ratio on Lo doc loans at present, so it in all honesty probably is not that bad a thing to happen.

Wonder just what the next 3 – 6 mths hold, although I think the worst is over……

Cheers

As already mentioned, RAMS  (the old one) did indeed have a couple of excellent lo doc products, and were very popular lenders for first home buyers that wanted to borrow 100% finance – not something done with the mainstream lenders in most cases. Rams were huge with the mortgage broking industry, having the significant majority of their loans written and recommended via this channel.
And yes, it did go pearshaped, along with so many other lenders since.
Rams exit fees have always been steep, and in most cases, I cannot imagine anyone having gone with a rams loan if they were considering leaving in the first few years. Unfortunately, they have stuck it to their clients since their collapse.
Cant see any reason anybody would have dealt with rams after late last year unless they got bad advice, were sucked in, or desperate. A lot of the franchises played 'spin doctor' when their collapse was iminent, and in the end, realised they needed to use their mortgage broking aggreggation partner (CHOICE) to avoid their own loans, and steer potential clients to banks or elsewhere, and also offer this to panicky clients too so they could keep their 'trails' and commissions.

For what it's worth, think how worse it is for people who blew money buying RAMS shares!!!! Millions of dollars never to be seen again – ($3k for me     )

I would envisage down the track RHG will have to try and be proactive at keeping some of their loan book, otherwise they will literally have nothing, but it sounds like they are not trying real hard at the moment.

For all stuck in a high exit fee loan (or for that mater, a fixed rate loan with any other lender) stick at it until you can exit economically – it makes the most sense.

Cheers

How can you claim borrowing costs for a PPOR or place that was purchased as such?
are you saying you already had a PPOR in your name, and purchased one in your partners name as a 'PPOR" with the intention of making it an investment property?
So that's where my taxes are going……….

If it is all legit, re-read Eddie C's comments, as you would need to 'be careful'.

Hi Sdainty – and welcome to the forum.
main shortfalls are as follows.

1) You will not be able to get finance for this type of property. In other words, you will have to buy with your savings/own funds

2) Other than the odd exception, capital growth is little if any other than very long term, so you would need to make sure you had plenty of positive cashflow coming in, as that would be the only real benefit of this type of property – besides holidaying it it yourslef and enjoying the lifestyle.

All the best.