Cost to refinance ?

There is always a lot of talk about interest rates and especially now with them being so low (and maybe even lower before they go up), and then you see all this advertising by banks and smaller lenders advertising great rates (and you think Hey, I'm paying more than than, why isn't my bank giving me a better deal). The generic advice is, shop around and vote with your business - go elsewhere. But how is easy is it really to move ? Besides the obvious intrusive financial body scan and door stopper paper work, doesn't it cost you a bucket load to get out of your loans and refinance with someone else even if you are on variable ?

 

If variable it would be about $350 discharge of mortgage. And a few hundred going in with a new mortgage.

 

Thats not too bad, thanks. Maybe its not the big barrier I think it is then.

 

I have heard, some banks even offer to waive that or provide an incentive to refinance with them.

 

Well I"m ready to jump ship with my entire portfolio of 5 properties, so maybe they will negotiate !

 

Some banks will pay you to move or give you more savings through other ways (e.g. freq flyer points).

 

Fees for moving from one bank to another are:
* Exit fees from existing bank ($250 - $450)
* Government fees (about $250, varies from one state to another)
* Entry fees into new bank (assume about $250)

The total cost is usually about $700 - $900.

Several lenders are offering cash incentives to move, you tend to come away with some money. The biggest problem is it's a serious hassle to move. The refinance takes time and often you'll then want to move your personal banking as well.

The most efficient course of action is usually to contact your bank or broker and ask if the existing bank can give you a better deal.

 

Moving all your properties at once to a single new bank can also cause issues in regard to servicing - you may find you'll need to do them one at a time, or use different lenders.

If the securities are currently crossed, this can add a whole extra dimension of fun

 

As Jess has said... one at a time if possible.

Why are you so set on moving the entire portfolio?

 

Not crossed, thank goodness. Am not set per se on moving the whole portfolio just frustrated at lack of service from bank and the bank broker (for this bank only) and I think I could do better on rates- plus I have always wondered if keeping everything with one lender actually disadvantages me rather than gives me any benefit. Want to sell existing PPOR (QLD) and buy new PPOR (Syd) so need a proper health check - obviously going to need to squeeze every cent I can get

 

@Jenny, with 7-figures of debt (I'd assume), a small change in rate will cover any refinancing costs pretty quickly.

First, work out if your current lender is the best place to be. If so, try and reduce rates with them. If not, it's probably worth heading elsewhere. Do the numbers (or reach out to one of the great brokers here) and see if it makes sense.

Having all lending with one lender has some minor advantages (negotiating a rate based on "total lending", easy to keep track of stuff)..but...

Also comes with disadvantages including concentration risk (what if they decide to increase rates out of nowhere, or change policy that doesn't work in your favour or worse).

And at a deeper level, if all your lending is in the one place, you're not likely to be able to build a portfolio as large (if that's important) as you could by structuring your lending right.

 

In that situation speaking to a broker is going to be the best way forward - they'll be able to tweak things and set it up so you can borrow what you need to for the next one. If servicing is tight, lowering the rate will make a difference to your servicing for the PPOR, but most importantly you'll want to be sure your Interest Only periods are managed, as once you buy the new PPOR you don't want to find out too late that you can no longer renew them.
Best to have the whole lot reviewed and a management plan in place before your next purchase.

 

Absolutely. One of my IP just came off IO recently after just 3 years. Kinda sneaked up on us. Doesn't matter so much now that ex PPOR is now IP and have no non-tax deductible debt but that will change if we get a new PPOR. Can you change to IO again after it has gone to I&P for a time ? The next one expiring in Sept

 

What can I expect to pay for a planning and refinance session with a good broker ?

 

Generally free unless they charge a fee for service - most brokers get paid commission from whichever lender you go with.

Cheers

Jamie

 

You can switch the loan back to I/O with other lenders definitely as part of a refinance. If its on the same product, the process and ability to do so will depend on the lender and their individual process. Some are as easy a quick phone call, others require a full application to adjust the repayment type!

Brokers in the main (here at least) don't charge a fee for their service, but are paid a commission by the lender. Most brokers here would be happy to go through your situation and provide advice.

It may be a good idea to have a read through posts and find someone you connect with. Alternatively there should be a handful of good brokers around you too - Sydney has plenty of great quality brokers around.

 

It depends on the lender - some lenders require a whole new application to extend IO and others can do it with a form so it will depend what your current bank requires.

If you're about to refi the loans you'll ideally set up a new term then.

 

Excellent feedback guys, thanks so much. You are all so helpful, its really appreciated (gush gush)

 

So one last question, recently purchased a property at 95% loan and just found out it needs a new roof. We have the cash, but its probably gone up in value for that amount in the short time we've held it. If the bank agrees, can we refinance up to that original amount without paying LMI again ? Or no ? Seems better to me to get bank to pay for it with increased loan so I can claim the interest on the increased loan and keep the cash. As its a replacement not a repair its goes to cost base so not tax deductible expense at tax time so can't even claim it

 

Yes best to borrow for it, but had you paid the loan down?