hi everyone,
ok, my sister is about to buy her first home.
she's down to 3 mortgage options due to her personal circumstances etc.
The top three lenders to accommodate your needs (as described above) are, mainly due to the these lenders will allow LVR of 95% and will allow you to capped cost of lenders mortgage insurance onto the loan.
1. BankWest Super Start Home Loan: Nil upfront fee, 100% offset, $15 per month, 6.40% for 3 years then 7.08% (can switch to another cheaper product after 3 years).
2. ANZ Break free package: $375 annual fee,100% offset, interest rate discount of 0.85% – therefore a current interest rate of 6.45%. If you borrow more than $500,000 the interest rate will be 6.30%.
3. NAB Choice package: $375 annual fee,100% offset, interest rate discount of 0.70% – therefore a current interest rate of 6.52%- will not allow LMI to be capped.
for the sake of this post – lets assume she has to take one of the 3 options.
so, I would personally go variable. my mortgages are, but that is my personal choice.
so…questions…
do you think the australian interest rate will drop again in the next 12-18months? %probability/gut feel. I am a little out of the loop as i dont live in Australia anymore.
she's not going to borrow 500k – if so, I think the ANZ loan would be the best due to their discount for loans of 500k plus.
adivce appreciated.
Hi avranjes
Obviously without any personal details from your sister it is impossible to provide any form of Credit advice however would just comment as follows:
1) Anz 95% lvr requires the borrowing to have held a retail lending product with the Bank for at least 6 months and it is 95% less LMI.
2) NAB 95% lvr is only for those clients which come up highly on credit scoring and again is Less LMI. The Choice Annual package fee is actually $395.
3) Bank West – QBE LMI and very hard on credit scoring. if she has perfect savings history and strong employment background then a possibility. Maximum 97% lvr so she needs to come up with the balance of LMI as it will be more than 2% depending on the eventual purchase price.
Rather than focusing on rate i would have looked at LMI premium, functionality, credit policy and how hard will it be to get the loan.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks richard, great advice.
Variable or fixed really comes down to personal financial circumstances.
Is your sister someone who will fret about the direction interest rates may take? Is she someone with minimal spare cash after meeting all of her finaicial and living commitments?
If the answer to either question is yes – a fixed rate may bemost suited.
The key is not to fix for too long – personally I like 3 yrs max fixed rates. Seems to have a nice balance between flexibility and certainty. A key consideration if your sister fixes is that break costs can be very high so only fix after looking at the whole picture and considering a range of factors,
Variable or fixed really comes down to personal financial circumstances.
Is your sister someone who will fret about the direction interest rates may take? Is she someone with minimal spare cash after meeting all of her finaicial and living commitments?
If the answer to either question is yes – a fixed rate may bemost suited.
The key is not to fix for too long – personally I like 3 yrs max fixed rates. Seems to have a nice balance between flexibility and certainty. A key consideration if your sister fixes is that break costs can be very high so only fix after looking at the whole picture and considering a range of factors,
Richard has covered it perfectly.
I would say ; given it’s a 95% Loan with Cap LVR- LMI cost is a very important factor to consider- more important then the rate itself…
ANZ if done via their own LMI ( ANZ LMI) tends to be slightly more expensive in terms of the LMI cost – at least 15%-20% more on average
So for example; presuming a $400,000 purchase in postcode 2119 as PPOR and P/I.
BWS( FHO) – $10,300
ANZ LMI – $12,000 ( will varies depends on location and PPOR or not etc…)a $2,000 difference/savings…comparing this to the rate with a difference of 0.05% x $380,000 = 190 per year
But really for high LVR loans it comes down to
1. Which lender/LMI would approve the loan …especially at 95% + CAP LMI– as Richard mentioned ANZ will only do this for existing credit limits.
1. If this is a PPOR or IP purchase
2. How good is your sisters overall file ( as getting approval for 95% + LMi is not easy) – so at times a self insured ANZ policy could help.Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
I wouldnt fix yet, I believe interest rates will go down by another 0.5% by July this year maybe even more. Just my opinion.
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
thanks guys.
a couple of answers…
1. she has good credit history with bankwest (customer since birth). and ANZ for 5 years +. She's also got a good credit history and the broker thinks she will be fine.
2. she's working out if she can handle variable. i think if there is upside for her, she can do it. but agree its a personal decision.
3. Michael, thanks for the maths – very helpful!
4. I personally wouldn't fix either, but as above, this isnt my decision, just trying to help my sister with pros and cons either way.
1) Anz 95% lvr requires the borrowing to have held a retail lending product with the Bank for at least 6 months and it is 95% less LMI.
Richard, ANZ cap LMI to 92/97% respectively…AVRANJES: She could always consider splitting her Home Loan to a 50/50 split or similiar. I would leave a portion as Variable to allow for additional repayments that could be redrawn at a later date if required.
Good luck & take care!
Tarek
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