I'm thinking about refinancing IP from CBA to STG (st george)

And any ***** who would risk their licence, loan book and income for <~$150 over three years isn't worth being called a broker. Picking the highest paying mainstream lenders literally equates to <5% increase in revenue.

Brokers can and do have to justify their lending advice to auditors - lose your licence and you can potentially be wiping out a loan book which may have an asset value of several hundred thousand to $millions.

 

I don't think the economics is there. If a lender which is best suited for the property investor gives the broker $0 commission why would the broker advocate for that lender.

I think all brokers want to create the image they are everyone's best friend but the logic just isn't there to support it.

 

A good broker doesn't use lenders because of their commissions. Those that choose a lender purely on commission are pseudo brokers and won't last very long in the industry. There is no room for cowboys anymore. It's also against the NCCP Act to recommend a product that isn't suitable for the client. To suggest that a broker uses the highest paying lender always with the only motivation being the commision shows poor knowledge of how the industry works.

 

No one said anything about the highest. Stop going to the extreme ends to justify an argument.

People are self interested rational people. Selecting a sub optimum product isn't being a "cowboy".

Since the broker is paid by the lender they have a fiduciary duty to act in the interests of the lender and not the investor.

 

Hmm i wouldn't be swapping between these two lenders for rate. Perhaps if the question was between a fully fledged bank and an online provider with a 0.50%+ difference in rate.

CBA has better a service proposition than St George (front end and back end), their competitive with their rates and they WILL discount existing lending if you are a genuine 'flight risk'.

+ the hassle of moving lenders based on the latest rate isn't worth it for a few bps.

If its rate that your after, go to the online providers and get real bang for your buck. St George simply won't be able to meet them.

My next steps in your situation would be:

• Get a written quote by St George (or use their headline website rate that your after).
• Show it to CBA. CBA pricing should match it, particularly if its reasonable. St George and CBA pricing have been reasonably similar for a little while, so they should come close/match/beat it.

You can do this all yourself. No need for a broker to get involved unless you want to build a relationship with one going forward. If there's any biased answer provided, you may find a refinance is what'll be promoted by brokers if you ask a question like yours (should i refinance?).

Cheers,
Redom

 

Having both CBA and STG i currently see there are differences in Equity Extracts:

1. If take out a Standard Variable Loan, both will pay the settlement proceeds to a nominated account.
2. With CBA, if you transfer the funds from the nominated account back into the loan, if the loan is repaid in full, the loan will close.
3. With STG, if you transfer the funds from the nominated account back into the loan, if the loan is repaid in full, the loan will remain open and the funds will be available.
4. With CBA, if you transfer the funds from the nominated account back into the loan, if the loan is repaid with $5 left, the loan will remain open and the funds are generally available to access the next working day
4. With CBA, if you transfer the funds from the nominated account back into the loan, if the loan is repaid with $5 left, the loan will remain open and the funds are generally NOT available until the loan cycle.

If you are wondering why you just don't leave in the offset account, have a read of @Terry_w 's post. Tax Tip 9: Don’t use Cash in Offset account to Invest and Tax Tip 1: Parking borrowed money in an offset account

This is probably also a reason to use LOC, but obviously that has a higher interest rate.

Other things I've noticed with STG
1. STG requires you have a filled a form to access Redraw, even though its offered (think of it as an extra step you need to take because whoever designed the process at STG is too stupid to keep up with the times.
2. STG allows a maximum of $25,000 to be taken from the Redraw per day, you can do more in the branch, but they charge you $25 for the service.
3. STG will charge you a service fee for your offset accounts if you no payments are coming from the account. They will allow you to have one offset account for free. No effect on users with single accounts.

 

Not sure if this has been mentioned or not, but St G have a strange system with their offset account on interest only loans which can end up with some of the savings resulting in the principle of the loan decreasing.

 

I can confirm this too... its been happening (and continues to happen) to my loan accounts to this day. According to @Mick C, this only affects old accounts and not new STG accounts.

This problem doesn't exist for me if the loans are fully drawn and the offset contains a $0 balance.

 

How old are we talking about? I haven't noticed this.

 

About a month ago I read the St G loan conditions booklet and it appear to be still there. They have a complex system by which they work out the yearly interest and then work out what you should be paying per month and the offset account reduces this. But because it is an average the reality is different, less interest and this extra saving then comes off the principle of the loan. I can't understand it!

 

I'm not crazy haha I sat up one night doing numbers for hours and I thought this was happening. Maybe I'm not as bad ay maths as I thought.

 

That's terrible.

 

Biggest things that my clients complain about BOM/STG:

1. As others stated, not a true Interest Only loan (The way the BoM calculates interest only loans results in the closing balance higher than the original loan amount...)
2. Can only split loan a primary loan account post settlement (ie. you have two loan splits of $500k and $300k, you can only split off the first loan split as it is the primary loan)
3. 5 properties before requiring to pay another package fee (can get waived)
4. Internet banking platform not as good as other banks especially mobile.
5. Higher allocated minimum monthly living expenses which reduces serviceability.
6. Additional offsets attract fees, however, they can be waived under certain conditions.

STG about 6 months ago were one of the most generous lenders in terms of serviceability (assuming no continuing debt) because they use the assessment rate for negative gearing not the actual.

Still they are pretty good as they will discount on stand alone investment loans including interest only. Pricing is sharp if you have a large loan 1.5m+, but not that competitive sub $750k. They do price well for LMI deals.

Also they are always willing to reprice existing customers without having to jump through hoops.

Most of the clients are happy with STG.

 

St G are also my preferred lender for trustee owned property with the loan in an individual name. They do this easily while most lenders won't because it is lending to a third party.

 

I have a loan from Choicelend which fits the description you gave. Had a CBA one before as well.

 

I've had my loan since 2011/2012 i think.

Say I have an loan value of $100,000, if its fully drawn down with $0 in the offset, the amount owing stays at $100,000.

However if i have $100k in the offset, each month, no payments are taken out, however the $100k limit reduces.

One of my equity loans started at $160k 4 years ago. Its now down to 147k (the loan limit that is), and it is an interest only loan.... always has been.

 

Yeah, I remember that happening with mine as well.
Also, if your interest payment is last day of the month, you can set up a direct debt, however the debit only occurs on the last day and the funds make it to the account the following day. It creates an 'interest default' as your account shows on their system as 'overdrawn' for the day. Every month you would have a couple of cents showing as 'default interest' on your statement.

Their genius solution to that one was to add in extra funds to the account (which got chewed up by the examples above) or remove the 'direct debit' and just tranfer 'roughly' the correct amount into the account a few days before interest was due.
It made end of year a pain in the whatsits.

I had been with their private bank for a few years. I contacted my 'manager' and asked about a rough indication of borrowing capability. After waiting for a response for about a week, he sent back a one line emial, basically saying 'no' however, his assumptions were so far wrong, Im pretty sure he didnt even read my email. That was the last straw. CBA had the loan(s) approved in about 14days as a new client.

Blacky

 

To get around the $5 month OFFSET account keeping fee ive been told to transfer $2k in and out of the account.
Works well unless you have funds in the offset account.... and due to tax reasons if you don't "clean" the offset money before a purchase, you could find yourself in a painful situation.

My solution was to leave the funds in the loan itself, have the offset account at a $0 balance, then have a automatic transfer that deposits $2k in and takes it back out on the same day - I intially put the description as "F U STG", but figured it would be better if i labelled it "To avoid STG fee"

 

Wow - that could be a disaster. Imagine transfering the $2k in/out. You could end up 'repaying' the debt, then 'redrawing' for non-deductable purposes. You smash your deductability.

Glad I left.

Blacky

 

Exactly, a very dangerous practice for an investment loan. you would end up with a large loan with none of it deductible.