Inputs about loan what are your thoughts? thx

Hi all, I would like to seek your inputs.

I am planning to purchase first IP and have been engaging a broker to find a suitable loan. I never deal with broker before as I went straight to the bank when I purchased my PPOR. My understanding is broker will be able to find the most appropriate loan based on my current situation by comparing what is available on the market. Beside at the moment I have no time to go to different banks and asking for loan like what I did in the past.

Cut the story short, my broker only give me two lenders to consider. I wonder is it a common practice to offer with limited lenders option? What do you guys think about the below offer, is it reasonable considering what happen with the royal comm thing?

Income: 76k gross
Monthly Expenses: 2700k
P&I Variable: 4.3%
The bank wants to lend me $505,000

Thank you & kind regards,
Ben

 

That’s some lean expenses unless your living with parents and not paying rent.

Very risky for a bank to lend that much without a partner income to spread risk

 

Nah it's $2700k ($2,700,000) as it reads..

 

Can’t keep up with the rising costs of smashed avo

 

I rarely give my clients options - there's not often a huge range that is truly ideal for them. If it's all about rate, maybe different, but when there's a strategy involved, or any kind of future planning, not so much.

Sometimes I give a comparison just to show why we're not going with x,y and z.

 

Would you like a doctor to give you a range of medicines to choose from to cure an illness, or to prescribe the best option when they know it is far better than the alternatives?

A good broker won't give you a lot of options to choose from, because they're meant to use their professional knowledge to come up with the best option for moving forward. Those who chuck half a dozen options at you are effectively leaving the most important part of the decision process to the least finance informed person in the relationship - the borrower.

I'm not going to comment on whether the option provided is good - without all of the information needed for an assessment that could be a terrible option, a great option or anything in between.

 

Hiya Ben

Did the broker provide a rationale behind their recommendation?

Personally - I usually show a few options but explain that one of them is a standout for a particular reason which is linked to the clients end goal.

Cheers

Jamie

 

I was also shocked when I heard my monthly expense is $2,700,000. I thought I live like a monk already

The bank did look into every single detail of those expenses

 

Thank you Jess, Corey & Jamie for your kind input, much appreciated.

Our broker is friendly and very prompt in communicating with us, which we are happy. However he did not provide justification on why P&I or why fixed and which option suits for us. My wife and I tried to do our own calculation ourselves to work out which option best to our situation, until we realise shouldn't our broker help us with the figures (i.e., cash flow projection, interests, etc)?

First he presented us with the two options (1. lower borrowing with lower interest, 2. higher borrowing with higher interest) for pre-approval. We did not receive recommendation which option is better and why.

Second, re P&I Variable or Interest Only, he said we will decide when I've got the house and talk about the figures 2 weeks before the settlement. Is it common to decide whether to go for fix or variable, interest only or P&I 2 weeks before settlement?