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First Home Buyer – Finance/Loan

Discussion in 'Property Finance' started by sydguy, 6th Oct, 2016.

  1. sydguy

    sydguy New Member

    Joined:
    6th Oct, 2016
    Posts:
    4
    Location:
    Sydney
    Hi all!

    Long time lurker, first time poster :)

    My wife and I will be settling on an off the plan apartment in Sydney's south in 5-6 weeks time. We're about to decide on a lender and have been trying to work out what our best play is. The apartment will be our PPOR for maybe 5-7 years, at which point we plan to either turn it into an investment and rent it out, or sell and upsize.

    A few key facts:
    • Combined income 220k (take home 150k)
    • LVR 87%
    • 570k mortgage
    We're leaning towards fixing at 3.69% for 3 years on an IO loan, with our salaries deposited into an 100% offset account. We plan on building large cash savings that would sit in the offset and remain accessible for emergencies etc.

    Does that sound like the right thing to do? I'm not sure whether we should be leaning towards variable (3.79%) or maybe even P&I whilst the interest rates are low?

    All advice / tips would be much appreciated! Cheers
     
  2. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    900
    Location:
    Melbourne
    see a broker and do some upfront vals/policy work done first. No sense picking a great lender who gets a short val and you cant complete, or a lender who doesn't do OTP or high LVR high rise apartments etc.

    If its going to turn into an investment, then I/O with offset, however you might find many lenders now charge a premium for I/O so the rate difference might mean you choose P&I.
     
  3. sydguy

    sydguy New Member

    Joined:
    6th Oct, 2016
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    Location:
    Sydney
    Hi tobe,

    Thanks for the response. I should have mentioned we've been working with a broker. They've been extremely helpful, but ultimately the decision on the structure depends on us; we just want to do it the smartest way possible.

    The product mentioned (I/O 100% offset at 3.69%) is pending applicant approval, but that's the rate we've been given. Of course the valuation might change the picture entirely.

    Our apartment is in a medium density area, so 3 stories max. 12 apartments in our development in total.
     
  4. tobe

    tobe Well-Known Member

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    18th Jun, 2015
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    900
    Location:
    Melbourne
    That lender cant do upfront vals? I/O with offset at that rate is pretty good, how long is it fixed for?
     
  5. sydguy

    sydguy New Member

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    6th Oct, 2016
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    Location:
    Sydney
    Apartment isn't open for valuation yet, we're still waiting on the OC. Fixed for 3 years.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,110
    Location:
    Melbourne, Nationwide
    Worth noting that most lenders won't give you an offset account against a fixed loan. Splitting the loan into two portions (some fixed, some variable) will give you access to both.

    Also many lenders are no longer offering interest only on loans above 80% for owner occupier purposes. If you're thinking ING, they definitely won't.
     
  7. sydguy

    sydguy New Member

    Joined:
    6th Oct, 2016
    Posts:
    4
    Location:
    Sydney
    Hi Peter,

    We have access to TMB who offer 3.69% up to 95% LVR with LMI.
     
  8. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    Joined:
    9th Jul, 2015
    Posts:
    1,083
    Location:
    Perth
    You may find the val comes in higher than purchase price (assuming a Sydney purchase here) and some lenders will let you use the val over the purchase price therefore decreasing your initial LVR so you may avoid LMI :)

    The broker will have to request this as it wont automatically be applied as needs sign off from above.