What a stressful 3 weeks!
We had trouble getting finance for a PPOR because my partner recently changed jobs and we don’t have 20% to put down (if ONLY we’d known how hard the MI was before we fell in love with this house!)
Anyway we did it! finally got finance but NOT through our broker.
After exhausting the possibilities with major banks (Homeside seemed a good chance but ultimately knocked us back too) she recommended Pepper and sent us the paperwork. We were a bit nervous about paying the application fee because she could not tell us what the interest rate would be or the associated loan costs upfront. We were horrified when it came back at 9.5% and 3% early repayment penalty. The Pepper loan was going to cost us $14,000 more over 12 months than a regular lender (obviously why they are known as a last resort).
In desperation I made a last minute call to Liberty the day our contract stated was last day to fulfill the finance clause. They gave us 8.5% and a fixed early repayment fee of $1 975 on a full doc, 90%LVR. While they had an extra upfront cost of $1800 the total loan over a year is going to cost us over $3000 LESS than the Pepper one.
My question to the broker was why didn’t she recommend Liberty first? She said only because of the higher upfront fee.
I know there are a few brokers on this board. What would you have done? Look at the 12 month picture, kowing that we will be in a good position to refinance in 12 months OR just looked at the upfront?
We’ve gone direct with Liberty and yes we think the property is worth the extra cost as it has great growth potential and our alternative is to wait 12 months and rent.
We may have lost the $300 application fee to Pepper now but saved a heap in the long run.
I don’t believe the brokers are aware of all possible loans out there, and think that they push and recommend only the banks that they are accredited to work for.
In our case the broker even misled us about the ANZ package told us wrong details.
I think like in everything else they are good and bad once operating.Good luck
MaggieWe calculate the total cost of the loan over 3, 5 and 10 years for every client. This calculation includes all fees (including any early repayment fees) and the interest rate. This calculation means that everything is weighed up equally and it would have identified that Liberty was the best. In your situation I would have calculated the cost over 1 year.
Not many brokers do their own calculations like this. If they don’t then you should. In my opinion it is the ONLY way to compare loan products.
By the way, I don’t rely on the “comparison rate” that is required by law because that is calculated over 25 or 30 years and doesn’t include early repayment fees.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Caz
I understand that you emailed Josie and she told you about Liberty (and set out your other options). I can tell you that Liberty is not on our panel (I’ve been meaning to set up a meeting with them) however we still took the time to fully investigate your options.
1. I think brokers should always consider the best lender for the client. There will be times when that lender is not on their panel.
2. I think the client has to take responsibility for the broker they choose to deal with. There are good and bad brokers out there. I don’t think it is that hard to tell them apart. If you choose a bad one and it all goes wrong then, in some part, you are to blame.
Some clients go around in circles. One brokers says “A” and another says “B”. I would strongly recommend people consider the strength of the person giving advice in the first instance. Then secondly (if your happy with the person giving advice) listen to the advice.
Do the same due diligence on all your advisors (or your “team”) as you would on a new property because one back team member can cost you a lot of money. Look at Caz’s situation. The Pepper loan would have cost her thousands.
I think this is very important and I will post as a separate topic.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auJust from memory, I think Liberty actually pays a higher commission than Pepper. So she probably wasn’t looking after herself first-otherwise she would have tried for the highest commission payer.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Firstly; I consider, Liberty to be the best in the non- conforming market. They have the cheaper interst rates and fees. (A lot of lenders have recently lowered rates to compete against Liberty). Also, very smooth to settlement.
The other lenders are generally only used in certain circumstances. For-example, Ge will do difficult areas. Bluestone will go up to 40 acreas. Pepper will place some of the fees on top of the loan, therefore requiring less funds from the client. The fees aren’t all of them, but can assist with some certain clients.
Also, Terryw
The upfront commision is higher with Pepper, actually is higher with all lenders just mentioned.
Stuart, Josie was indeed in touch with us and if not that we were running out of time I would have asked Prosolutions to take another look at it for us, I was impressed with the initial report you sent us. As it was I felt the local broker was doing a good job right up until the Pepper debacle.
The brokerage that our “advisor” works for has all the non-conformers on their panel including Liberty. I have asked her one more time to look at my comparison figures and tell me why she chose Pepper.
Liberty will “cap” the loan to allow us to add some of the upfront fees to it AND, unlike Pepper, will handle the FHOG for us. With Pepper we would have had to get a short term overdraft to cover the gap before state revenue paid up.
So, how does one make sure they are getting the best advice from their mortgage broker? (For future reference!)
Hey caz,
I think like most things it is a case of due dilligence. I am in a similar position right now with getting my PPOR, I went to see 4 banks before I spoke to a mortgage broker so I could see what was out there myself. Didn’t take long maybe half a day I would just walk into a bank and say I wanted to talk to someone about getting a home loan, most places were happy so see me a few scheduled an appointment for the next day. When I spoke to a broker I found him to be good and informative but seemed to disgregard certain products, I believe this is because he couldn’t get business with those lenders (or however the whole comission thing works for them). At the moment I am in a position where I will probably go with one of the banks I researched myself but still take some of the brokers advice with regards to product selection. I have a fridge magnet that for me sums up my outlook, it goes something like this “Do not believe anything that anyone tells you. Even if I tell you, do not believe until you discover it for yourself”[Buddah]. This is the first property I have ever bought so I have had to learn pretty much everything myself, some people are helpful with their advice others proclaiming to be experts when you investigate what they say it turns out to be wrong. I think the best advice I recieved on this forum to date has been to do your research, and that is with everything to do with property including your finance. The other thing I would say is when you get your loan don’t set and forget it, review it regularly look around and see if their is a better deal, most loans don’t attact a penalty for leaving after 3 years, if you are looking at a 8.5% interest rate certainly changing over when you have some more equity could save you thousands.
The option I am currently looking at is –
First year 5.25%, change over to another product @ cost of $300 (will save me approx $1700 in first year). I have also been able to negotiate the application fee being waved by negotiating directly with the lender, the broker was unable to do this.
Finally, best of luck.McDeyess [
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