Is $17k lender fee normal for a $1.97m loan?

We paid $17k as lender fees on $1.97m loan for our recent IP purchase.( This included $1.28m new loan and $688k refinance of existing ip.)

Our mortgage broker suggested this lender because this lender offered maximum certainty of loan approval. The property was bought in auction and we didn’t have time to shop around for better loan deals.

We are paying 4.8% interest.

I have asked mortgage broker look for refinance options. If we can refinance it at 4% with some other lender it would save is $1k per month in interest.

However I am not sure how much “bank fee” next lender is going to charge.

How much bank fee is the industry norm for a loan of $2m. Is it different for new purchase and refinance?

 

What was the lvr?

 

What is a lender fee?

 

80%

 

0.75% application fee +
$2300 lender legal cost +
$2000 other fees such as first title, pexa, electronic file fee etc.

For two loan applications. One for new purchase and one for refinance.

see attached.

 

Latrobe are a bit unusual - sort of non-conforming lender, so their fees are high.
If refinancing to a mainstream lender virtually all of those fees will be built into the rate and you would just pay govt fees such as registration of mortgage.

If refinancing you might also be able to claim most of the Latrobe fees in the same financial year, instead of over 5 years.

 

You mean I can claim $17k lender fees (along with interest incurred) as immediate deduction for current FY 18-19?

 

If you refinance this year and all the $17k are borrowing costs then yes

 

Not a straightforward question to answer, but in terms of ease of servicing, where do Latrobe sit? Somewhere between Pepper and Liberty?

 

At the high end generally. they have some good policies for 'hairy' deals.

 

Judging by this post, Latrobe rates seem similar to Pepper, which for IP (last time I looked), were around 4.8% compared with (2 yr fixed) of around 4% with the major banks. So, you certainly pay a price premium with these types of lenders. I have used what are called secondary lenders (in my case Pepper) in the past for reasons of servicability, but then refinance with a major bank as soon as servicability allows, to both get the better rate, and move to a lender with a more favourable funding base. Has anyone on PC used these type of lenders in that way?

 

That's not unexpected for La Trobe.

Realistically 4.8% for La Trobe isn't a bad deal. You've used 'maximum certainty' as a reason for using La Trobe, but realistically if you're using La Trobe, there's going to be a bit more too it and there may not be much in the way of alternatives shortly after settlement.

If the better options were marginal and La Trobe was the sure thing, why not simultaneous applications?

What is it about your circumstances that other's wouldn't accept but La Trobe did?

 

On a different topic, I also think upfront fees should be kept in perspective. I don’t know the ins and outs of whether $17k for a $2m loan is on the money, but if it was used to buy a $2.5m property (80% LVR with $2m loan), you would also be paying a $150k upfront fee to the Government (Stamp Duty), and in Victoria, a $50k fee per year (every year) if you are on the top land tax threshold.

 

It was about my contract job. Mainstream lenders required my contract to be remaining of at least 6 months.
I have been in contract jobs for last 4 years as it pays better. My contracts are usually 6 months and occasionally 12 months long with same or different employers.

 

New purchase was for $1.41m. Stamp duty for that is 63k in NSW
Initial deposit was paid using equity from separate IP which was refinanced also to La Trobe.
Total loan (80% lvr) is $1128k (new purchase) + $688k(refinance from CBA to Latrobe)

 

There's got to be more too it than that. I can name quite a few lenders that would accept this if you can provide something like a PAYG summary to support it.

What you've described is very common in some professions like IT. My own wife was an IT contractor and I've managed to get loans for us.

 

My broker took the call (in the best of his abilities and good intent) to go with La Trobe in those circumstances (considering time left for settlement date and xmas holiday in between etc).

I remember he mentioned if we apply simultaneous application then there would be more enquiries (resulting in more delays) as lenders share data among them.

 

There's probably a few reasons that Latrobe were the answer. Expediency is one, but servicing is more likely the first factor.

4.8% for an IO INV loan isn't the worst, but can be better.

If you went to Latrobe, its unlikely you pass serviceability with mainstream lenders (otherwise your broker wouldn't have placed you there and you would have saved ~$15k in app fees). This means your weighing between non-bank options that may be better than Latrobe. Realistically, given you've already paid the fee hit, there's not going to be many options significantly better if you are opting between various non-banks (Pepper, Bluestone, Liberty, etc).

In these cases, we often look at non-banks as a bit of a bridge. A chance to purchase, with a medium term plan to get back into affordability ranges of mainstream lenders. May be worth chatting to your broker about what you need to do to pass servicing with most lender groups. It may be a small adjustment like closing a few credit cards, or it could be a bigger servicing gap that needs to be closed over time via debt reduction/income increases. Having this knowledge will give you a bit of insight as to what's required to open up lending options for yourself & thereby reduce your finance costs.