Looking for the right mortgage broker

I had told him that I was only interested in an offset and not so much the redraw facility. That's when he told me why a redraw was so much better and why he recommends to all of his clients.

I would like to think in future we would be able to invest and initially had the intention of doing so however, due to current circumstances, we have now decided that our main goal needs to be a place to live. Ideally, we would like to make sure we leave ourselves in a position to invest in future.

I understand why a low rate is attractive but I also see how and why it may not always be the best value.

 

There's a million questions here....
Loan amount,
Savings balance post purchase
Savings history and income
Monthly UMI post purchase
Rate on loan amount for basic loan Vs packaged loan
Will you be ahead paying package fee ($400) and possibly higher rate on packaged loan for offset feature?
Is it cost effective at this point in time based on savings post purchase?
Will the property become an investment in future?
It's quite easy to convert to a packaged loan in future, but based on a million scenarios above its possible you could be saving money in the first couple of years not being on package with offset.

Offset in my personal circumstance is the only way for me, but without knowing a million details it may actually be costing you in the beginning.

How long is a piece of string?

 

Beware of redraw. Make sure it’s really what you need, we were recommended a redraw on what was then a PPOR and all it’s done is give us a lot of non-deductible debt on what is now an IP.

 

There is a huge difference between an offset account and a redraw facility. Any broker that suggests they're the same thing doesn't really understand what they're doing.

I can't say I'm keen on the idea of 1 bedroom appartments in the Melbourne CBD. The rental yield may look good, but they're not cash flow positive when you factor in the various holding costs. They have little chance of increasing in either value or rental income.

When there's only one or two lenders that will even touch them you should be asking yourself why these lenders don't like these properties. The reason is because they're terrible investments.

 

Talking about brokers not knowing what they are talking about. I got a call out of the blue from some old broker who said ‘Hey,how are you going, anything I can do for you.’ Well, if you get a cold called, you never miss an opportunity, so I said, ‘Well, I am not happy with my interest rate, what can you do’. He came back in day, and said he can put me on a lower rate. Wonderful I said. It largely involved moving from variable to a fixed rate. No big deal I said. Then he dropped the clanger. He said, you need to do a full application. Yes, full servicability check, like you were applying for a new loan. For me, that >100 pages of documentation. I said, that can’t be right. Usually, moving from variable to fixed, that has always been a one page form. He said NO, full check is needed. I said again that can’t be right. He suggested I call FOH. So, that is what I did. They sent me the one page form. Filled it out. Moved to a 2 year fixed rate for 0.20% off my old rate. Happy man was I. And guess what. Broker called me again in about a week, and said ‘Harry, how did you go’. I told him. Haven’t heard from him again.

 

If he had simply done the 2 page switch form, he doesn't make any money. He wanted to get paid for it, so he has to re-originate the loan from scratch. Even then he wouldn't make much given most lenders won't pay another upfront commission.

 

Ah, thanks Peter, I see. Usuallly, when it is a choice between a stuff up and a conspiracy, you go for the stuff up. Maybe in this case, it was the conspiracy.

 

It could have also been his interpretation of responsible lending.

When applying for a new loan, changing or varying a loan, you first need to verify current financial circumstances, and generate the preliminary assessment.

What happens when clients can’t afford to switch to fixed? Interesting question.