Hi guys
Approached by a broker who provided an option to refinance investment property loan to Resimac for a quite attractive 4.4% IO rate, while most of the major banks offer at least 5% or more.
Also saw news that in year 2016, they merged with HomeLoans.
Of course, as with all the non-banking lenders, there are some ventings and lashings on the review sites about them.
So I am wondering if anybody here has dealt with them before? Their company website states they were established in 1985, so if they are truly as horrible as those vents on the review site, then I would think they couldn’t have lasted for over 30 years right?
They play in a few spaces with white labels and the like.
I’d note that they don’t work on a standard variable with discount basis – so their rates can change depending on the customer – with cheap rates offered in for new customers, and then floated up with time whilst cheaper rates are offered again to gain more business and not existing. With interest only rates continually rising at this time, this may mean you might be taking a ‘cheap’ rate – and then find it rises shortly after leaving you back at square one. Whereas a SVR backed product means they can’t play the same games in terms of bait and switch/new customer only rate offers which entice people in, but don’t necessarily stay for the life of a loan.
I’d say if you want to stay IO – consider whether a fixed rate might be right for you – otherwise you’re going to risk further rises which will erode any savings. Alternatively if your cash flow can support it, P&I is all the rage with investors due to <4% interest rates with some products which the interest saving pays for a significant portion of the principal component of the payment.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
The major banks are charging me 4.5% interest rate for P&I.
Problem now is while I do have more than enough income to sustain it, but the idea of me feeding 700+ per month out of my pocket (because my property is in an expensive area where rental income doesn’t catch up) is less than appealing to me.
The broker who spoke to me said in the past 4 years that he dealt with Resimac, Resimac has not raised the interest rate over and above any other lander and he has assured me that he will not sign me up with a “lender special” loan, which is the type of loan that attract clients with lower rate and then hike it.
How much trust to put in that?
Hi Corey
I just looked at the document I was given. The product is called “horizon <= 80 LVR Standard Var & Loc Inv”.
Are you able to tell the nature of such a loan by looking at this product name? Does it look like one of those “lender special” loans that will experience rate hike later on?
Steven,
Horizon is the product that comes with an Annual fee of $295 and has a 10bps discount to the Standard product.
Where the loan is greater than say $300K it is worth it.
It is a not a honeymoon product.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard
What does “honeymoon product” refer to? When you say a product is “honeymoon product”, are you refering to packages with ridiculously low interest rate in the beginning and the rate will hike after a short while? Does that mean the concern raised by Corey does not apply to Horizon product offered by Resimac?
The amount being refinanced (if I choose to go ahead) does exceed 300K.
Cheers
StevenHi Steven
A Honeymoon product is 1 with a discounted rate for say the first 12 months and then reverts to the standard rate the lender charges.
This is not the case with Resimac.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard
Based on your knowledge or experience with them, would you know how frequently they might change rates for existing Horizon product users?
Cheers
StevenThere’s no pattern – the only thing to remember is that it’s not a standard variable based product so they can offer enticing rates to new borrowers, whilst letting their back book (existing clients) rates float up to balance their costs.
The only way you can avoid this is via a SVR product, but then they might not be discounted as heavily but will be more consistent in cost.
I’d note that this doesn’t mean all non-SVR based loans are bad – there are a lot of great lenders which don’t structure their loans as SVR products but still have consistent good pricing.
Best thing is to speak to your broker – you should have a trusting relationship with them. If you feel you cannot trust their advice then this may be a symptom of other issues and you’ll need to work out whether this is for a genuine reason and need to look elsewhere, or just fear of the unknown.
BTW – the product has been sitting around the same pricing for near on 6 months so they have been consistent in the near term – whether this remains over the next 29.5 years of a loan term remains to be seen.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thank you very much Corey
The broken has assured me at least for the past 4 years, they have not increased the interest rate for this product. He also explained that not everybody gets exactly the same interest rate. For example, user A may sign up with this product with a rate of 4.5%, and user B may sign up with this product at a later time with 4.45%. The rates for user A and B are slightly different, because during finance situation between when user A and user B joined are slightly different, but once signed up, the rate remains pretty much unchanged for both users (that is user A gets 4.5% for long term and user B gets 4.45% for the long term). He said this has been the case for the past 4 years that he has worked with Resimac.
However, with APRA making the regulation and banks tightening the lending, Resimac is also doing something similar too. I got information that starting from 1st September, new applicants will be signing up with 4.6% while existing applicant’s rate will remain un-changed at 4.4%.
Initially I was not too sure how best to verify the broker’s information, but I guess with Richard’s response in this thread (which is pretty consistent with the broker’s advice), I think that should be fairly accurate.
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