3 year fixed period - When does the 3 years start?

Discussion in 'Loans & Mortgage Brokers' started by Bris Jay, 9th Mar, 2020.

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  1. Bris Jay

    Bris Jay Well-Known Member

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    I've got a 36 month fixed loan with CUA that was used for the construction of an IP. I started construction around January 2018 and completed it in June 2018

    In my loan contract, it states that the period is 36 repayments. I am unable to find anywhere in the contract if the 36 months begins at the first payment (during progress payments) or once the loan is fully drawn.

    I'd prefer to exit early so is there provision to include the first repayments during construction or is there something generic that banks use to define it as 36 periods from when the loan is fully drawn?
     
  2. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Unless you pay a rate lock fee most lenders will impose the rate for the agreed term that applies at the start of the advance for the nominated term before it reverts to variable. You may be exposed to any market rate changes prior to that date if its undrawn.

    You could ask the lender for the specifics of your loan. I'm sure the call centre team will have that date on their screen.
     
  3. Bris Jay

    Bris Jay Well-Known Member

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    Hi Paul,
    My bank will absolutely impose the rate for the full 36 months but I'm just wondering if the 36 months starts when I make my first payment (i.e. after the first stage payment on the construction) or 36 months from when the loan is fully drawn (construction completed).

    Based on the contract, the first day of the month after the first payment would be when my period starts but when I asked for the date that my fixed period ends, they told me it was June 2021 instead of January.

    It's not specified in the contract and the exact wording is as per attached. 89269119_2760497017402133_6988909520084795392_n.jpg
     
  4. Bris Jay

    Bris Jay Well-Known Member

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    Nevermind, I called CUA again and spoke to someone different and they confirmed that I was given the wrong info... It is 36 months from when my first payment was due. That was during the construction phase. Currently paying 4.1% so getting out of that loan while rates are down will be nice!
     
  5. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Lenders are pretty good at telling people how it works. The challenge is finding the paperwork and reading it. Their letter seems pretty clear. Normally interest and repayment periods are measured between initial drawdown and thereafter same date of each month counts as "1 month" or an assigned date as they have indicated here : 1st day of the following month thereafter.

    Interesting that if you make the first draw down on 30th March the first month is just 1 day in length. Banks always seem to make it work in their favour !! Many lenders will make the "month" the same date of teh initial draw down of the following month/s.
     

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