Guidance needed for first PPOR home loan

Hi,

I need some guidance on getting my first PPOR home loan. Presently I am living on rent and bought one home and land package which will start end of May.

Package is of 420k and I am planning to borrow 330k. I got saving of about 150k so left over from this loan I am going to keep in offset account. My only income source is fortnight after tax salary of 4500

I intend to pay off as fast as possible keeping some deposit for another future loan.
My another requirement is to buy land which will title end end of 2018 for 270k. So I need to plan with keeping both of above in mind.

I am not going to big banks they have worst rates compared to others.

My first question should I involve brokers. Do brokers help or they work for banks.

I have short listed bankwest for 3.99 variable rate and yearly 395$ package.

Loans.com.au standard variable rate for no ongoing fees and offset account is also interesting option.

My doubts in mind are

How does loans.com.au behaves. Do they offer one rate to new customers and as they become old they start changing or increasing rates for older ones. What is rate policy of this organization. Any experiences on this ? What about valuation practices and time taken by loans.com.au for settlement plus valuation. I got only 2 weeks settlement notice at time when land titles so I am bit worried about them in that front too.

My inclination towards bankwest is that it's good bank and I can walk in branch as and when I need to.

Please enlighten me with your guidance. I am based in Melbourne North outer suburbs if that matter.

 

Don't keep cash for the next investment but pay down the non deductible debt and reborrow. See my tax tips.

Brokers work for the borrower not the banks. Banks work in their own best interests

 

Thanks Terry , I was thinking to keep that in offset account. Do you think it's bad idea and I should borrow less to start with ?

 

Decent brokers work for you - not the banks. They want to provide an awesome service so you rave about them - referrals from existing clients and repeat business is important in this industry.

There are plenty of brokers on this forum that advise on structures like yours everyday of the week - have a read, get a feel for their level of expertise and whether you feel like you'd be able to work with them.

Cheers

Jamie

 

What if you have no non-deductible debt?
What is the best use of cash?

 

You would probably want to borrow as much as possible without incurring LMI. You can always pay it down later, but you cant increase without tax consequences.

 

As in a fully paid off main residence? In this case you could use the cash to invest, but it depends on the situation.

If no PPOR then perhaps a different strategy, maybe just keeping the cash in the offset and/or spousal loans etc

 

@humptydumpty , Ive dealt with both Bankwest and Loans.com.au.
Bankwest became a lot less competitive when CBA took over. I was still paying 4.88% when others were reducing with the RBA (1% less).
I switched to Loans.com.au which then raised my rates for no reason a couple of months in. Many reviews say the same happens to others.
Neither seemed to care about retention - for the sake of me saving $2k/yr, they gave up $30k/yr on interest by letting me leave.

I'm now doing everything through a broker and very happy with what mine does for me.

 

And don't assume every bank will construct and for the ones that do, don't assume they all do it equally.

Believe me, construction is not for the faint hearted. The last thing you need is your bank making the process harder.

 

When I first started with loans my Principle and interest on the PPOR was at 4.26. Now I'm at 3.66.
They increased the rate twice for me:
1. When they increased it for all their investor loans and increased mine too thinking it was an investor loan. I called and got it sorted.
2. When everyone else (all the big fours and every other bank too) started raising loans and they raised mine too by I think .15. I called and Negotiated. They dropped mine back by .06 (but not all the way that they raised it). I was ok considering there was no where else I was getting that low a rate and moving was going to be costly.

So my experience with loans.com has been great in the interest rate department. The actual issues with loans.com are:
1. Everything is online, so you can't walk into a branch and sort any issue settlement etc. out IF you were to get any
2. The website is very basic.
3. There is no Line of credit options but they give you loan splits (which I'm currently doing and so far a straight forward process which is well guided but lets see how it sorts out)
4. The entry criteria is strict (20% deposit)
5. The last time RBA dropped rates by .25 basis point they only passed on .14 but other banks etc were doing the same. Because they are all online without the usual operating costs I couldn't understand them not passing it all on. I called, threatened to leave and they dropped another .04 for me. Moral is always call and renegotiate when you need to.

Vs that is my IP with the big four that I started at 4.24 dropped to 4.11 when RBA dropped rates and learnt just a couple of weeks ago that now I'm at 4.33. Maybe I'm over simplifying it and yes it is an IP and at only 10% but I didn't even get a written communication when rates were raised for me as "it was in the papers". So what people are saying about loans.com has actually not been my experience and my experience on that has been with one of the big fours.

Also I have no account fees and a 100% offset as well as redraw (unlimited) with loans.com so they do offer all these features. I can also make unlimited lumpsum payments. The card I got from them for the offset allows 5 cash withdrawals a month and unlimited online transactions and you can use it for free at any I think Westpac atm (from memory.. I have never had to withdraw cash but there is one banks atm you can use for free)

 

I do agree with your settlement points. That was my concern with them too. They say that as long as all documents are in place they can settle in 2 weeks. I was nervous about my settlement the bank being online so I prepared it all in advance and submitted it and then made sure I called and informed them and then kept on top of it. It went without a hitch. However I was 10 times more comfortable knowing I could walk into a branch with my IP loan.

Things haven't gone bad for me cz I was prepared but I don't know how it would be IF you did get settlement issues. Communication, more than the usual would be key with online banks so if you can mange that your trade off is a low interest rate.

Another option is settle with a big four than move. But if you use a broker I believe you are locked in for a period? I have never used a broker so not sure. Also you will need to look into moving costs as that means some doubling of costs like valuation.

 

This is from loans.com.au site
Offser Account and Redraw Facility Explained - Loans.com.au

I have an PPOR with them at 3.68% with offset and no ongoing fees (80 lvr)

They sell offset loans with 100% offset redraw facility,
Do you think this can be an issue in case of them defaulting for whatever reason?


-Regards

 

My Experience with loans.com.au was very good.
I started with around Dec 2015 at 4.06%
and had two drops till now
May 2016: 4.060% to 3.810%
Aug 2016: 3.810% to 3.680%

No Increase yet.

 

Most definitely get a broker on your team. Should be like night and day advice and guidance wise compared to bank direct. A decent broker will have a whole team of experts to assist you as well with various other requirements. Something I believe is not considered enough as the right people at the right time can make or break a deal. Plenty on here so take your pick.

 

They don't mention the tax issues

 

Just update.

I have decided to sign up with non big 4 bank and then move.

The loans.com.au don't do home and land packages. They want land in your name before going ahead which is not possible as only after titlement it can happen and that can happen only after loan.

So plan now is to switch when I can at the earliest after I build the house. The cost of switching will be 600 + valuation cost so I should be fine.

And I avoided broker for now. One thing I noticed
Brokers give advice to sign up with players with whom they have tie up. It might not be best for you. So always do independent homework. May be brokers can work for investors who are serial borrowers and want to extract as much as they can from all places. Lock in period of brokers is also another thing to keep in mind.

 

That is quite a serious allegation. How do you know your broker wasn't suggesting the best option for you?

 

There is no lock in period with brokers. Some might have a claw back clause where they charge you the commission the bank claws back if you refinance or sell within 12 months. It's not a lock in period.

Some brokers have better relationships with some lenders and may favour them. This can work in the clients favour, shorter turnaround times, better discounts, waiving fees.

Not always though, some brokers might recommend them over a more appropriate lender, but this is unusual and unlikely for most brokers that have been around for a while.

If you had spoken to a broker upfront you would know straight up online lenders like loans.com and UBank etc don't do construction. Many don't do purchases at all, only refinances.