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Mortgage broker recommendation for first IP

Discussion in 'Property Finance' started by illmakeyourgrannyflat, 6th Jan, 2017.

  1. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    Hi All,

    I am looking at purchasing my first IP within the next couple of months.

    Can you please recommend mortgage brokers in Sydney, particularly one that strong expertise/experience with IP's.

    I am speaking to one tomorrow - my close friend's dad but I want to speak to a few of them before I make a decision around who to go with.

    I've read lots around off set accounts, benefits of interest only loans etc but I'm not really a Finance person so I'm having difficulty understanding all these different concepts and trying to figure out which one will best suit my needs.

    Thank you

    Christina
     
  2. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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  3. aussieB

    aussieB Well-Known Member

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    A mortgage broker need not be local. So you can take a pick from the great guys on this forum and would possibly not need to interview them. The process of getting good advice from an mb can be a bit time consuming. So, I wouldn't have a plan to get in touch with an mb on a Friday for a property I want to purchase pn a Saturday.

    Also, have a slightly futuristic strategy ready for your IP. Example can be, I expect this IP to have 40k growth in a year and I need to be able to use that money for further investment. Then, the mb can get you with a bank which will do a split for no extra charge/without a full application. This is something I never considered and am paying the price. I went with a local mb not from this forum.
     
  4. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    @DaveM @aussieB

    Thanks for recommendations and advice!

    So today I went to speak to my first mortgage broker based in Sydney. He is my close friends dad, James.

    Based on my circumstance ($80K income, c. $100K savings, no other debt/loans), he said that borrowing 10-20% will not be an issue for a $400K property. Since I'm only purchasing a $400K property and not borrowing too much money compared to most people who borrow $400-500K+, I'm better going for a basic package but doesn't include an offset account. He said I could go for the full package but the annual fee would be $395 + $100 set up fee so doesn't make sense to do that unless I'm getting a big loan. He said that even with the basic package I could still use my $100k savings I could make extra repayments to save on interest and have the option to redraw those extra repayments IF I need to for whatever reason eg need the money to go on a holiday or buy my next IP but will have to pay $25 every time I withdraw (this is not much compared to paying almost $500 for a full package). James said that when I purchase my next IP, because my loan will be a lot more, they can change it to the full package which will include the offset account.

    In addition to this, he suggested that I go interest only for 5 years also at a fixed rate for 2 years, roughly 4.19% but getting a FR is $500. I asked him what happens if the interest rate goes lower but it's fixed.. he said the problem would be when the interest rate goes up not down because when it goes down the interest you pay is tax deductible. But we all know the risk of interest only... what if the property doesn't go up within 5 years? You're essentially screwed. My investment strategy was going to focus more on high rental yield rather than CG (although both would be ideal) but I feel like if I was to go for the interest only option my strategy would have to change in that I need to focus on high CG. What are you thoughts on this?

    On top of this I'm looking at borrowing 88% instead of 80% although I have the savings for it for 2 reasons:
    1. I could use the additional money I have left over for my next IP purchase which will be within 1 year or so.
    2. LMI is tax deductible (although this is not something I rely on entirely)

    So... this is the advice I got. It sounds good. There's also no application fee or any fee I need to pay. James gets commission from the bank so I don't need to pay him anything either.

    For those who have had experienced with brokers, what are your thoughts on this?

    This is not exactly relevant to this post but I was initially going to look for properties in Brisbane and Adelaide through a buyers agent because I feel like Sydney is a bit too risky.. with property prices having spiked up like crazy. But he said that vacancy rate is very important when it comes to IP and that whilst lots of development is happening in Sydney, there isn't an oversupply of property (yet) and most likely won't be for a while because the population. What's your thoughts on this?..

    Apologies for the long post. The more research I do, the more questions I have to make sure I'm making the right decision and I would like advice from various different types of people before I make up my mind.

    Thanks a lot :)
    Christina
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Dont know enough of your goals resources fears and risk tolerances to suggest if this will work best for you.

    Couple of add on questions

    1. What is the lenders and Mortgage Insurers revaluation and cash out policy like ?
    2. What will you do with your left over cash


    ta
    rolf
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Is this your first property (not just your first IP)? If you don't have any other debt, then an offset account would probably be a very good idea. It will probably save more money that the fees associated with it and set you up better for whatever comes next.

    No problem with the fixed rate suggestion. I could be wrong, but I suspect rates are about as low as they're going (I have made this prediction before and been wrong though). If you take an offset account you'd need to split the loan into a variable/fixed mixture. A bit of budgeting would be needed to figure out the exact split.

    Cash out policies and longer term serviceability are useful to understand the longer term planning aspects.
     
  7. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Rolf and Pete ask some good questions. If you're planning to build a portfolio, good to ensure you're somewhere with suitable policy for accessing equity.

    And where are you going to put your leftover cash if you don't have an offset account?
     
  8. jprops

    jprops Well-Known Member

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    Be wary of this advice re: redraw to spend on personal use (i.e. holiday).
    If you did this, the amount redrawn would no longer be tax deductible. If, however, you used cash in an offset, you'd have no issues.
     
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  9. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    Thanks for all your advice.

    With the cash left over I was going to put in the the "redraw" facility as part of the basic package that they are offering. I've just done some further reading on tax implications for offset vs redraw and I can see why offset accounts are better especially if I am looking at purchasing more properties in the years to come.

    Just surprised that it costs $395 pa for having an offset account... this is considered to be high?..
     
  10. Nemo30

    Nemo30 Well-Known Member

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    To be honest, alarm bells rang for me when you mentioned the redraw. Most investor savvy brokers would have explained the difference between an offset and redraw and why one was better than the other in your situation. Redrawing for a holiday isnt the advice I would expect when discussing loans for an IP.

    I would be looking for a broker who is thinking strategically about your next purchase and the one after that. A decent broker can make a big difference.
     
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  11. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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    You might want to get some tax advice before setting this up. It would cost you a fortune in lost tax savngs.
     
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  12. MTR

    MTR Well-Known Member Premium Member

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    @Shahin_Afarin is my broker Syd based, I can highly recommend his services and expertise

    I won't recommend anyone on this forum unless I have used their services. He is also a developer, savvy investor
     
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  13. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    To be honest, the advice that I received from my first broker wasn't bad but I didn't feel confident.. and I think I will go with my gut feeling and speak to a few other brokers that people on PC have recommended so far.
     
  14. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    Agreed, speaking to an accountant was the next thing I was going to do. I have an accountant that I have been going to for my tax returns but I don't believe she specialises or has strong knowledge around property tax. Do you (or anyone) have any recommendation for anyone based in Sydney that I could speak to? I don't really know what the is considered a "reasonable" fee when it comes to accountants but I don't want to be paying a ridiculously high fee. Given this is my first IP, I don't think the advice will be difficult.. I just want to make sure that I am set up correctly from the start and understand key tax implications when it comes to investing.
     
  15. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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  16. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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  17. illmakeyourgrannyflat

    illmakeyourgrannyflat Member

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    Thanks Terry! Will look into it :)
     
  18. Peter P

    Peter P Well-Known Member

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    Hi Terry, keen on understanding what you provide during consultations.
    1) How long do the sessions go for?
    2) Do you diagnose and make recommendations/suggestions on issues you see based on your clients goals? legal, tax, loan perspectives?
    3) How much do you charge for subsequent consultations?
     
  19. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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    1. up to 2 hours
    2. yes
    3. depends. If you use my services for loans I don't charge unless some drafting involved (such as wills, trusts etc) or overly complex.
     
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