First Home Buyer – Finance/Loan

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

 

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.

 

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.

 

That lender cant do upfront vals? I/O with offset at that rate is pretty good, how long is it fixed for?

 

Apartment isn't open for valuation yet, we're still waiting on the OC. Fixed for 3 years.

 

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.

 

Hi Peter,

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

 

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.