Refinance with broker or DIY in future ?

Discussion in 'Loans & Mortgage Brokers' started by tattoo, 14th Oct, 2019.

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  1. tattoo

    tattoo Well-Known Member

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    Recently refinanced a 400K investment loan, IO only for around 3.65% variable.
    Understand lowest rates aren't always the best but am seeing rates mentioned here that are consistently below this. Did I refinance too high ?

    Would it be worth looking at re-refinancing again early next year (say a potential Feb IR cut) and do it myself rather then through broker ?
    I have a few other investment loans on variable P&I set up through broker channel.

    Any thoughts from those with experience if this is a good/easy/hard/risky/worthwhile to shop around and get loans directly ? Is the etiquette to let my broker know i'm doing this ?
     
  2. Property Twins

    Property Twins Mortgage Brokers, Buyers Agents & Mentors Business Member

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    3.65% IO Investment is a decent rate. What LVR?

    What is preventing you on going back to the broker?

    If you do refinance it yourself, unfortunately the bank will claw back their remuneration.

    It would be good to discuss with them, and see if they can find you something better.

    But... what happens when you spot an even better deal following this?
     
  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    First I'd ask why you're refinancing now and thinking about doing it again in less than 6 months? Refinancing costs money, a cheaper rate won't recover the costs in such a short period.

    Even if you take into account the cash back some lenders are currently offering, it's a false economy. It costs lenders an average of 0.08% to offer this but those lenders are about 0.15% more expensive anyway.

    Also 3.65% is quite competitive for an interest only investment loan. I suspect the rates you're being quoted aren't for the same thing.

    Most likely the best thing you can do is go back to your existing broker and ask them to revise the pricing on your loan.
     
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  4. Property Twins

    Property Twins Mortgage Brokers, Buyers Agents & Mentors Business Member

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    As Pete said...this is very likely.

    I have had people tell me their friends were getting low 3's, and why the client had to pay high 3's. Turned out their friends had owner occupier loan, at 80% LVR, twice the size of lending.

    There are so many variables.
     
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  5. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    ^^^^
    Get this all the time.
     
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  6. paulF

    paulF Well-Known Member

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    So what dictates a lower rate? Lower LVR, larger loan ?
    Also why would an IP loan cost say .5% more when compared to a PPOR loan when the loan is the same size for example but the LVR of the IP is a lot lower than then PPOR property so less risky.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Lower risk and large (more profitable) loan plays a factor in rate negotiations. Current lender appetites for different lending as well as their current funding costs also means that pricing can vary.

    My theory is that investment loans shouldn't be more expensive than owner occupier loans, this only started about 4 years ago. At the time it was a convenient way to raise the new capital requirements from APRA that was politically correct. The gap between various types of loan rates have closed recently, but I think this is something the banks do because every lender does it and they can get away with it.
     
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  8. Archaon

    Archaon Well-Known Member

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    It goes hand in hand with the demonization of investors.
     
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  9. tattoo

    tattoo Well-Known Member

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    Thanks for all comments. Perhaps my impression of where rates for this type of loan was lower then reality. Also this lender is a medium tier and the fact they only plan to pass on 0.15 of the latest cut whilst some others are passing on in full or more was annoying.
    The LVR is at 80%. I'll ask for a rate review a bit down the track first

    my broker is fine to work with. However the tendency to stick to the big banks or proposing just one of non-bank lenders in the few times I've refinanced over the years, make me think I'm not getting the best deals out there.
     
  10. Archaon

    Archaon Well-Known Member

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    Alot of things your broker considers when finding you finance.
    Ease of equity release/servicing calculators/overtime considerations/depreciation add-backs among others.

    If you focus purely on the IR, you will be sorely disappointed when you try to do things in the future, like access money, redraws, if the IR is cheap there will be a reason why that is the case.
     
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  11. Morgs

    Morgs Well-Known Member Business Member

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    You should talk about your concerns with your broker. There should hopefully be a logical answer e.g. in many cases the majors provide stronger servicing than smaller lenders. Not saying this example is necessarily the case for you - but you should be able to gain insight from the conversation & make your mind up from there.
     
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  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I agree with the previous two posts. In the past I've used certain Big 4 lenders a lot simply because others don't have the serviceability profiles that are needed to get the job done. Or it's the policies and consistency of their decisions. How your loan is operated after settlement is a huge deal as well.

    I can tell you that for certain profiles, ING has been consistently cheaper than any of the Big 4 for a few years now. The problem is that their servicing model is one of the most conservative in the market. It seems they're only looking for the most straight forward vanilla loan applications so that's all they get (and very little is straight forward these days). They're also quite bad at back book pricing, their loans are competitive at the start, but they rarely remain that way.

    This situation has changed a bit over the last year. The CBA has become a lot more conservative in servicing policies in the last few months, they used to be one of the best for certain investors. I'm still not going to recommend ING for most people, but there are some second tier lenders that are becoming a lot more attractive. In many cases it's not because the smaller banks are doing that much better, but because the Big 4 have made things so much more difficult.

    Needless to say, the lending market is a real mess at the moment.
     
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