Recommendation : refinance homeloan from AMP to ?

Hello Friends,

Need some help to refinance our home loan (PPOR). We took homeloan from AMP 2years before (Feb2013). Total Original Loan amount $620,000 and current borrowings is $615,000 ( over 30yrs).
We have two components there.

3 Year Fixed Rate Loan - Principal & Interest
Rate 4.99%
Original Loan amount $440,000
Current balance -$435,000

Professional Pack Variable Rate Loan - Interest Only Variable Payment
Rate 4.55%
Original Loan amount $180,000
Current balance -$180,000

We pay $350 annual fee.

Looking for your advice/recommendation about getting better home loan rate as it seems our current AMP rates are high for current market situation.

Thanks,
Stella

 

Is interest rate your main priority or are you an investor?

 

When does your fixed rate expire Stella? In a year or so? Your rates are high, but if the break fees are crazy it may not be worth moving. As a first step, ring AMP and ask for your break costs - once you know that you can see if a rate cut is worth it or not.

 

Not much you can do about the fixed rate portion unless you're willing to break the fixed rate contract. This would likely involve some costs. As a general observation the break costs from a fixed rate loan tend to be more than the benefit from a lower rate.

You may have some success renegotiating the variable portion of the loan within AMP. Given the total lending their professional package (which you appear to have) is currently offering 4.35%. Their basic product is 4.28%, they might also let you switch to that.

Essentially your options are to break the fixed rate and then shop around, or simply tollerate the fixed rate and negotiate within AMP on the vairalbe. The latter tends to be the better option in my experience.

 

Thanks everyone for your inputs. I just spoke with AMP to understand exit fees. Here is what I was told ( I might have mis heard any fees name but the amount is correctly noted)

Exit Fee : $100
Layout Fee(? I might have mis heard it) : $250
Land Title : $109.50
Break Cost Fixed Rate Loan : $175
Early Repayment interest : $2473.4

 

Its my main property.

 

- Fixed rate expires after 11months.
- Please refer my above post for break cost.

Looking for your detail inputs Jess. Thanks again

 

@rooster123, get a broker to hook you up with 4.15% SVR at CBA and refinance (if you can service the loan).

$395pa package fee and a big rate saving.

You'll save all your exit costs and then some in the first year with the lower rate, and should be eligible for a $1500 refinance cashback to boot.

 

Hi Stella, I can't see it? A break cost is a fee the lender charges for breaking a fixed rate - it's a fee that varies from day to day and may be very large, or nothing at all as one of my clients recently discovered!

It's different from your interest rate or package fee. Give AMP a ring and ask them.

 

Thanks Jess.
Are you referring to below $2473.4?
--------------------------
Exit Fee : $100
Layout Fee(? I might have mis heard it) : $250
Land Title : $109.50
Break Cost Fixed Rate Loan : $175
Early Repayment interest : $2473.4
--------------------------------------------------------------------

 

BTW, the Early Repayment Interest is otherwise known as a Fixed Rate Break Fee.

Quick number crunching (and it's very quick so don't hold me to these numbers), suggests you'd save about $1,000 on the fixed rate loan by refinancing to a lender offering 4.30% - there's a few of them out there.

Even a lender offering rates around 4% wouldn't justify the saving at this point. The break costs are still higher than the savings over the next 12 months. Even the cash back offers only really offers a break even outcome at best.

Based on the numbers we know, your best bet is probably to renegotiate the rates on the variable portion with AMP.

The argument that could be made is that rates may increase by the end of the year. If you get out now, refinance to a fixed rate, you'd be in a better position overall - if rates increase before your existing fixed rate ends.

Personally I suspect that rates will probably start to increase in that timeframe, but that's because they're so low that it's hard to see any direction for rates to go but up. I made the same prediction when rates dropped below 5% and was wrong.

 

It's a bit difficult to comment without seeing the greater picture - ie serviceability and the like, otherwise recommendations could be made for lenders which you won't even be eligible for.

Negotiated a bit of fixed rate lending with CBA to 3.99% as of late, investment variable portion to 4.37%. Taking account all rebates and break costs, you might come out marginally ahead. Peter has hit hte nail on the head, it may very well be worth sitting on the loan until the fixed rate expires and then review your options in detail with a broker then.

 

Unless I missed it no one actually asked you if you paid LMI for this property originally and its current value?
Based on the answer to both those questions a refinance may not be a good option.

 

Yes, we paid LMI originally around $10300.

 

Hello Everyone,
Here is the official response from AMP rep.

 

If you refinance then that LMI credit will be lost. That might not be an issue but if you plan on investung it could be very handy.

Also what is its current value?

 

Between the break cost and the LMI you'll lose, you're unlikely to come out in front sadly - although, if the property value has risen enough (and seeing as you're in Sydney it may have!) the LMI side may not matter.

I would suggest finding out what AMP will offer on the variable portion first.

 

If its just rate - your best to bend AMP to try and keep you. Often it doesn't often make that much sense to switch to a major bank purely based on rate. This rings especially true given the exit costs are so high.

 

Thanks everyone.

I will give call to AMP Retention Team to negotiate on VARIABLE. But if you guys can give me some examples of lenders which offer low rate on variable then I can use that figure to negotiate with AMP folks. Please let me know.

 

AMPs own offer of 4.28% is already one of the better rates around right now. Suncorp are a little better at 4.15%. The majors are pricing around 4.30% at the moment.