Fix how many years?

Discussion in 'Loans & Mortgage Brokers' started by Clayton, 16th Oct, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Hi PC friends, made up my mind to fix my loans as at current rates will save me 12k per year. Currently 5.22% IO Variable, I have 5 loans, unfortunately some crossed & need to remain with Westpac due to the tighter foreign income servicing. I do have a 50k loan & may just leave that variable & link into the offset.
    Question I need help using our magical crystal ball is wiser:
    Fix 2years at 4.39% or 3years at 4.49%?
     
  2. Otie

    Otie Well-Known Member

    Joined:
    26th Mar, 2016
    Posts:
    1,404
    Location:
    Vic
    Id go 3 for piece of mind
     
    Toby and Clayton like this.
  3. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    Joined:
    31st May, 2016
    Posts:
    2,738
    Location:
    Australia
    Have you considered other Big 4 lenders? There may be opportunities, where lenders look at 80% of foreign income. What currency are you earning in?
     
  4. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    We tried applications through CBA & ANZ and unfortunately no way out in the short term of refinancing & uncrossing loans. Earning in HK dollars, thought the more favorable exchange rate compared with the last few years would have helped too. I have one dud Gladstone unit backwards 150k+ & townhouse in Lynbrook thats almost the same ahead so was thinking to sell both, clear out a lemon & then refinance the remaining loans, my tax agent went though the numbers & made sense to hold
     
  5. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Brainstorming ideas??
    Gladstone & Lynbrook Fix 2 years reducing expenses, hopefully some recovery in Gladstone market then sell both.
    Pakenham Fix 3 years & assess. South east a lot of land releases but continues to develop
    North St Marys fix 3 years. Future development so will hold long term
    Morningside townhouse. Fix 3 years & assess, Brisbane looking good medium term after the inner city unit supply taken care of.

    or just do as my broker suggests, fix all 3 years
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    You might have options to uncross the WBC ones, even if servicing isn't there. It's done 'behind the scenes' so no application/servicing necessary.

    It's a bit fiddly, but can be done - if you go to branch they won't be bothered so best off chatting to a good broker who can think outside the box.
     
    Last edited: 17th Oct, 2017
  7. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    Joined:
    31st May, 2016
    Posts:
    2,738
    Location:
    Australia
    It is interesting to see CBA didn't work out, and Westpac did. CBA do tend to take 80% of the income, but the FX rate applied works out worse that what xe.com converts at.

    Why did your accountant suggest to hold on to the properties?

    What is the opportunity cost of holding on to properties which may not go anywhere?
     
  8. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Thanks @Jess Peletier I spoke with the brokers Westpac contact some time ago & it seems that the best pathway to uncross was upon when i decide to sell one of the properties & then restructure. Let me have another chat & update you.

    @Property Twins yes shame it didn't work out as i was considering some loans P&I with the low rate offers, Westpac have been good to me over the years of foreign income loan applications just a shame there not offering the same rates as some of the others right now.

    Looked at holding for reasons of Melbourne's market still growing, rental on the property is good.. then factored in depreciation & holding costs for Gladstone & if theres a likelihood even a small increase in value over 3 years.. seemed the increase in Melbourne would out way any continuing loss.. but yes i really would be happy to clear out a lemon
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    By 'best' they mean 'easiest'. For them. Don't go to a branch for structure advice.
     
    Clayton likes this.
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    which way is the wind blowing ?

    ta

    rolf
     
  11. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Usually which ever way I expect it not to blow haha as that's generally the theme when I exchange funds. Your right though, I'm over thinking.. Just doing my best to be as guided & informed as possible before locking myself in. Cheers all for your replies, super appreciated
     
  12. Ethan Timor

    Ethan Timor Well-Known Member

    Joined:
    16th Nov, 2016
    Posts:
    154
    Location:
    Australia
    If the entire uncertainty is if to fix for 2 years or 3, I would consider doing some 2 and some 3. This way you won't meet a cliff of having all of them come off fixed at the same time :rolleyes:
     
    Clayton and firststep like this.
  13. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Cheers Ethan! Definitely thinking along those lines.
    @Jess Peletier If I was to consider selling one of the fixed properties can that loan be moved to a new purchase so as to avoid any break costs. Assuming i'd be needing to add some additional funds to cover the gold coast purchase. The wife is set on moving to the gold coast & I'm weighing up whether I sell Lynbrook to fund the purchase. So don't want to lock myself in with a fix if it will cause major headaches, maybe better to sell first while unfixed & uncross the loans in the process.
     
  14. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    In theory yes - WBC should be able to secure the loan with cash in the interim and then do a security substitution when a new property is found. It's a bit complex, so it'll be a headache regardless, but possibly more for your broker than you. :) BUT - if funding will be difficult with WBC for the balance of the purchase, you'll be better of not fixing and having the flexibility to get funding elsewhere.
     
  15. Colin Rice

    Colin Rice Mortgage Broker Business Member

    Joined:
    9th Jul, 2015
    Posts:
    3,183
    Location:
    Perth
    Really? Without servicing? Do you get paid :)?
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    Trail only I think? Can't remember with WBC.
     
  17. Colin Rice

    Colin Rice Mortgage Broker Business Member

    Joined:
    9th Jul, 2015
    Posts:
    3,183
    Location:
    Perth
    With WBC if you rewrite non broker loans (branch introduced) internally you get paid upfront and trail.

    Would need new account numbers so internal refi required via full application.
     
    Ethan Timor likes this.
  18. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    You don't need to rewrite the loans. So prob no payment from WBC and will need to charge upfront.
     
  19. Clayton

    Clayton Well-Known Member

    Joined:
    21st Nov, 2016
    Posts:
    122
    Location:
    Melbourne
    Right thanks Jess, I guess complicated as the property is crossed with another.. although luckily both have made equity gains so the other property shouldn't cause any LVR problems. Big challenge will be foreign income servicing, so hmm maybe selling first I won't get a loan approved for another property even with a big deposit. Security substitution may be the only way. with every question, 2 more arise. thanks again