Lender wants to end my IO period before expiry.

I have a loan with Advantedge that is 10 years interest only. I now want to fix my rate for 3 years at 4.27%. Lender says yes we can do this but at the end of the 3 years fixed rate term your IO only term will end as well. WTF??!! I say whether the rate is fixed or variable has nothing to do with 10 years IO term! They don't care. They want to cut short my IO term! I have lodged a dispute and got me nowhere. Now about to go to Ombudsman. Your thoughts?? Any other lender do this?

 

My interpretation is Lender views the 3yr Fixed Interest as a new loan, and is "allowing" you to end the previous loan without penalty. Would be worth reviewing your mortgage terms before protesting too loudly.

 

this is normal as far as I know. @Jess Peletier, @Corey Batt, @Colin Rice or @Redom would be able to confirm

 

I agree. The 10 year IO is a fixed rate loan. You are breaking it and want the best of both worlds. So dont break it. hey are just bringing terms in line with current lending policy. (Who does a 10 yr IO now ??)

You need to weigh up if the current loan should be changed. I dont think Ombudsman can look at a problem that is only created if you agree to change the loan to the current offer. Thats like complaining about a card fee that you accept when you apply for the card.

 

Some do this, some don't.
I believe NAB/Advantage do. Can be frustrating if there is a big mismatch. Not sure about NAB retail as they do 10 year I.O whereas broker do 5 years.
CBA/St George/Westpac have it separated so don't see this issue.
Thanks,
Redom

 

Some lenders do have a quirk that the IO term can only be as long as the fixed period. If you don't like it and the 10 yr IO term is valuable to you (it should be) leave it as is.

 

Hi Paul, currently the 10 years IO is variable. I want to fix for 3 years.

 

Hi Jess,
I guess I could just fix the rate and refinance at end of 3 years. I just don't know 100% what my situation will be in 3 years. Might have more properties and kids!

 

As the saying goes "if it ain't broke, don't fix it".

 

In theory you could do that, but as you say it's all the unknowns in 3 years time! What's the rate difference between your variable and the fixed rate you're considering?

 

The difference is 0.18% now. Not much, however, I am anticipating more rate rises as a result of "increases in wholesale funding costs"....

 

They very much can and do request this. Some lenders segment their fixed and interest only periods - but many others don't and want them directly aligned. Because of this with those lenders we generally suggest to clients to stick to a variable interest only period for as long as practical and avoid taking on further interest only periods, otherwise as that cash flow mitigation is worth the potential premium.

As always horses for courses, it depends on your circumstances but if you're using Advantedge it's traditionally been for serviceability constraints, so best to keep it variable if possible.

 

What is the rate difference between now and if you Fix for 5 years? I would only consider locking in for 5 years if the current LVR is well past 80%. How far into the 10 year IO period are you?

 

Stick with your 10 year IO variable period.

It's standard with NAB group lenders - not something the CIO is going to help you with.

Cheers

Jamie

 

Don't understand all your abbreviations Rolf!

 

Don't know about 5 year rate. 3 years into IO period. LVR is 54%.

 

BY THE WAY YOU ARE ALL SO HELPFUL! BUNCH OF LEGENDS!! THANK YOU!

 

Seems many lenders take a fixed term as a new loan, NAB is one of them. If you try and split they want to do a full assessment I was told

You also find that you wont be on the same discount once the fixed term ends with a lot of them.