Hey guys,
My father is looking at using RAMS and I know you have been speaking about this lately but I have some more specific questions as the information they are telling my father doesn't sit with me.
I told my father I would be careful about using them given the recent negative hype about small lenders but the guy at RAMS has told him they will not be affected in any way as they use St George Banks money. I am confused! Can someone please specifiy where the money comes from, how RAMS make money etc? Wouldn't you be better off going to St George direct and reducing some of the fees if the are just acting as a third party?
He was also told that you start with a 3.5% interest rate for the first year, then 6.99% year two and then it goes to 9.5% from the third year onward. The selling point there is that after the second year you can easily refinance and start from year one with a 3.5% rate again and so on. Surely this can't be the case without inflicting a heap of fees etc. Why wouldn't everyone do this? If it was cheaper and if it were true, why can't I setup my own finance company and advertise 5.5% interest rates for the life of the loan (using RAMS of course), pick up a heap of business because I am about 3% below the std variable rate offered by the banks, and make an easy 1% on all money I lend if I continually refinance every 2 years. I would simply refinance each loan every 2 years! Does anyone have a detailed outline of fees, how this works, and if it is in fact true? I doubt it!
Thanks in advance.
Cheers,
DanThe confusion probably stems from the fact that some of the mortgages already held by RAMS have used funds sourced from Global money Markets. As the sub-prime fallout was affecting the interest rate charged to RAMS for the Global Funds existing mortgages either have to have their interest rates increased or RAMS has to decrease their small profit margin made from charging a small percentage of interest (their margin) plus the wholesale rate to its customers. Why because it would loss competitiveness if it increases its interest rate to it's existing customers as they could refinance to an other bank.
When RAMS said it sources the funds from St George it is referring to a wholesale market where St George lends large sums of money (wholesale) at a lower interest rate than it would lend to retail (small loans) customers.
You need to investigate if RAMS have large deferred establishment fees on their loans that are waived if you have the Loan for a certain time period.
So if you refinance to another bank you may incur the establishment fee.
You are probably referring to the RAMS Easy Start Home Loan
You will notice the statement from http://www.rams.com.au/default.asp?page=/our+home+loans/all+our+products/rams+easy+start
Option to apply to switch to another RAMS home loan after only two years (from RAMS Web site)This means you have to apply for another RAMS home loan not the Easy Start Loan again.
What are the other RAMS home loans you can apply for?
They will not be on the honeymoon interest rate but something else.
Ask what fees are payable or deferred at the two year point if you take this option and see if you can get documentation that states what the fees are.dannads wrote:Hey guys,
Can someone please specifiy where the money comes from, how RAMS make money etc?They sell commercial paper in the US mostly.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHiJRAmdEfNs&refer=homeIt doesn't look like this is going to be a viable option in the future.
You may be better off suggesting rather than this loan your pa goes for Rams new loan that is being promoted next week…….nationally…….very hard to beat, no app fee, no annual fee, and better then the best bank loan as rated by cannex at this time. Keep your eyes out. It seems odd to talk about 'buying and selling money' but that is essentially what happens with most lenders. Instituitions like credit unions and banks get a lot of their lending funds from over the counter deposits – other lenders are literally 'selling' their loans as bundled packages to other investors, who of course expect a return. Ever seen a super fund or financial planner talk about 'fixed interest and mortgages' as a 'sector' of an investment? This is an example of that also….money from returnes on …mortgages from a variety of sources/lenders. While that is a simplistic explanation that is generalised, I hope it gives you an idea. The link Foundation posted above refers to as where some of the funds come from, and at the point in time of the 'scare/panic/etc etc the last couple of weeks, rams appears to have been more relaint on raising funds via that source than most other 'non bank' lenders'. So while everyone is affected across the board, Rams was hit the hardest. The result? Forecast profits will be done some for the year. All the best.
Sorry but this sound absolutely crazy. Its just like the adjustable rates mortgage situation in the USA, where people signed up for teaser loans of a couple of per cent only to find out that two years later the interest rate skyrocketed.
In this environment if you cannot afford a decent deposit STAY away. The market is at historical highs, housing affordability is at record lows.
I'm sure i will get flamed for this, but in the current environment you had better be very careful. Sure property moves up on average around 10% a year, but this doesnt mean every year, its only a long term average.
How would you feel paying around 10% interest and seeing droping or no capital growth for 10 years. Everything moves in cycles.Each to their own, but I must admit to being absolutely blown away by some of the interest rate negativity. The media has a lot to answer for thats for sure. Seriously, rates now are around what they were 5 years or so ago, and back then people were still buying houses for PPOR and for investment. In fact, most are now enjoying the benefits of having done so. Things need to be put in perspective – regardless of the interest rates, over extending your self is asking for it – but from an investment perspective, it depends on your attitude to risk, your buying ability. and understanding that 'nothing ventured – nothing gained….'
I could add more, but will leave it at that for now……
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