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I spoke to my mortage broker today and she informed me that to leave RHG it will cost us $16000! After confirming this with RHG ( grrrrr) I realised that we were SCREWED! only half the loan is fixed and that's $8000 exit the rest is fees and charges!!!! The mortgae we have is shocking! Does any one know how we can get around this screwey deal and refinace with someone else!!!! We had preapproval on a new loan but the exit fees make it pointless!!! HELP people with money knowledge!!!
Hi CSI, welcome to the forum. It was all in the fine print and your certainly not alone. 18 big ones is a decent amount, however how large is the mortgage? Its all relative of course. Have a look at your statement/s and work out how long it takes or took to pay $18,000 in interest. We were not locked in when our rate hit 17% , however I wish I was at the time. Many people probably did predict that interest rates would nose dive…..I wasn't one of them. I'm certainly not whinging as if rates had continued to rise then I would (and you) be sitting comfortably. When are you locked into your current rate? Interesting times indeed as some of the larger banks have stated they may not pass on any or all future rate cuts. As people have stated on this forum, "you cant have it both ways" Is your lone split? If not then something to consider next time. Sort of hedging your bets either way. Good luck.
Maybe the loan was a no doc or a low doc originally? These had high exit fees, 2% from memory. Have a read of your loan agreement and see how the fees are structured. Usually they decrease as time goes on, so you may find if you wait a bit you will save a fortune on the variable part. Not much you can do about the fixed as you took a gamble.
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
Hey don't worry sit tight – my exit fees are $13,000 and I am leaving at end of Sept 09 Yippeeee… they got me also on a Lo Doc.
work out the exit fees with what you might save over the next 12months with the interest rates low. If you can justify it and can get the $18000 back within 12months go for it otherwise sit tight.
To discharge their mortgage (yesterday) and in addition to up to 2% Early Repayment Fees they also charged me legals $295 and a discharge fee of $695. My variable interest rate has now fallen from 7.88% with RHG to 5.29% with new lender (RAMS). There was also a small amount of cash out as property value had increased (even where moving from RHG 85% lvr loan to RAMS 80% lvr loan).
The discharge fee in my case was $695 despite being stated as $295 in my loan contract. Person in RHG discharge section stated contract permits us to change our fees at any time. I asked how was I notified of the change..answer we advertised this in the Australian and we would have written to you and given you a letter advising of increased discharge fee.
I asked could they send me a copy of the letter to me. They said it was a proforma letter which won't have your address on it.
Am tempted to buy 100 RHG shares and attend their next AGM to ask a few questions. Financial press reported that their profitibaliity at the moment is exceeding original RAMS propsectus forecasts despite them not writing any new business and having a very low shareprice. Why?…probably due to them screwing clients with their higher rates and subtanital ERF income.
Its all short termism by RHG…this time next year they may be left with only problem borrowers who can't satisfy other lenders of their ability to service a refinanced loan. Which will mean falling profits. Their loans in arrears are already higher than a lot of bank lenders. The directors deserve a big whack of karma for the way they have treated their borrowers.. I suspect they will get it too.
Thanks every one!!! So basically after doing the maths, RHG have us( and many more) over a barrell!!! It was a 100% loan orignally b/c of a major stuff up by Stgeorge and we were desperate. Although the house we are in has improved in value by 45000, we are still stuffed. And we only had 1/2 fixed and 1/2 variable. So the $16000 exit fee is only on half!!! So stuffed until March next year! grr I had heard that if we 'go back' to RAMS ( i laugh as I type) they will reduce the exit fees. Has anyone else heard this???
CSI,
RAMS will pay a rebate if you refinance from RHG…I receive $1500 for a loan of about $150k..(rebate increases based on loan size) .however where normal RAMS variable loan has 1% Early Repayment Fees for 3 years if you accept the rebate offer they will require 1% ERF's for 4 years..
Don't understand why lenders are the bad guys here?
Where was the deception? Did they not advise you of the exit fees and how they are calculated? Part of the contract isn't it?
Isn't the idea of locking in to a fixed rate loan that you have the benefit of pre-defined interest payments? The instituation offering you this deal also takes on some risk and seeks to offset some of that risk with higher exit fees, etc.
If I could have locked in my interest rates, knowing that if I had bet wrong and they were going to fall heavily…… but it did not matter since I could just go back to variable whenever I chose with no penalty….well I reckon that would be a popular deal – proably too popular for the lenders!
CS
CSI,
What's wrong with the lender? It is the borrower's fault…Just imagine that if you locked into Term deposit for 1 year with interest of 8.2%, then suddenly they changed it to 3.25%, what would happen?
craigsed,
my RHG loan was variable. I would stay with RHG if their variable rates were in line with other lenders but have to incur 2% ERF's to change lenders as their rates are considerably out of line with bank lending rates.
Where RHG's rate is 7.88% other lenders are around 5.2% I am being screwed. Their variable rates went up higher than most other banks (at the start they were lower than the banks) and have not fallen by as much as other lenders…they are not passing on all or at times even most of RBA rate cuts. At the same time RHG are reporting profit results that exceed RAMS prospectus forecasts (a part of which would be income from Early Repayment Fees as disgruntled borrowers finance away from them).
RHG have also varied their discharge fees after the loan contract was signed..from $225 to $625. They have done this as the contract says they can vary these fees at their discretion. Most loan contracts have similar clauses.
I see at p.49 Fin Review today that RHG itself is being held over a barrel by its lenders and I don't have much sympathy:-
"…RHG says its being "put over a barrel" by the provider of a $750m debt facility"
One of RHG's arguments in NSW Supreme court over the debt contract is that… "indemnity amounts and interest being calculated by Elektra are not in "good faith and in a commercially reasonable manner"…
interesting…the notion that the banks are the 'bad' guys.
Thank you craiged for your insight…basically we have to sit tight with a bunch of 'crooks'(bad guys) until the terms of a contract I never signed runs out. I never signed with RHG but RAMS and at the time we were told nothing had changed…but since they have the legal expertise and I don't I have to wait… So they are the 'bad' guys but am I the 'good guy?' I unfourtuntaty have to learn things the hard way.http://au.messages.yahoo.com/finance/home_loans/1819?p=1
I know this is an old post, but check out this forum on RHG. I have been following this forum on Yahoo for a while now. It;s interesting reading.
Blackhotel, thanks for posting this link. It just shows that there are plenty of people who got screwed by RHG. I am one of them and had to sit out the 3 years of exorbitant exit fees they imposed on top of their discretionary interest rate increases which were almost exponential to what the RBA was doing. Anyone suggesting 'that it was all in the fineprint, you should have read the contract' has no idea what they are talking about. Nowhere in the contract did it say that RHG will raise it's interest rate whenever they like by how much they like, and it will not be linked to what the RBA does. I wrote to them, of course without success, and in the end did the only thing I could. I scraped together any cash I had in various other investments and paid my loan down to $10k. I even borrowed on lines of credit (which was cheaper). Now my three years is up, and I am refinancing.
The only thing that will stop RHG srewing their customers is a class action, and unfortunately us loan customers aren't organised enough to get together and act as group. The only good thing is they won't be screwing anyone else in the future, because they aren't taking on customers. Thank god for that.Its not just RHG. People got screwed with RAMs, GE whitelabel, Challenger, wizard, first mac and plenty of other non banks.
When I say screwed, not all these lenders have the heavy DEF however they all promoted cheap rates however after the GFC ended up more expensive than the majors. Most people don’t realize that brokers can earn up to 1.5% upfront commission which is more than double what the banks pay. The lender claws the commission back via customers as opposed to the banks that claw commission back from the broker if the loan is paid ou too soon.
If you can get a loan with a bank why on earth take a loan with a non bank lender??? Usually it’s only the broker that benefits…
I still have a vivid memory when my old mortgage broker told me to go with wizard.. I disagreed with him.
But the selling points were IR was cheaper than banks… acting as "White Knights" against banksThey might want to be white knights but they have no control over their cost of funds.
Yes and who indirectly owns Wizard now ? er ………………………………..
Richard Taylor | Australia's leading private lender
Like Westpac / Rams, they didn’t buy all of the existing loans. People that got burnt are the ones that took loans before they were bank owned.
So if i got a rams loan in december of last year is my loan owned by westpac?
I don’t know exactly how hey manage their capital however they are owned and funded by Westpac. That does not mean Westpac won’t sell them in the future:- they are still run as seperate businesses.
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