Refinance with Reduce home loans?

Good morning,

I have a P&I invesment loan w/ offset with state custodians at 4.31% for my first IP.

I'm about to buy my second IP so researching++ for better rate, with plan to refinance first at the same time and draw 50K in equity towards buying the second. (I also have 75K in offset).

Reduce home loans are offering 3.74%, but comes with $900 in set up fees EACH for new loan and refinance. Also discharge fee is $895!

Ubank also offering 4.09% P&I, which is another option, but only offer redraw (not offset) and i'm confused about the significance of the impact of amortisation as a (hopefully long term) investor.

In the whole process state custodians have now reduced my rate to 4.09% so now wondering whether it's possible to just take up new second loan with cheaper lender but keeps existing with State custodians. Does diversification extend to mortgage providers lol???!!! Or should I just get my second loan with state custodians too?

Any help would be greatly received. I've trialled a couple of brokers but they haven't been able to offer anything better so far....

 

Trialed a couple of brokers?? For rate??
Ubank definitely for you Becky

 

What's taken you to these couple of lenders?

Nevertheless.. . Rate is only one part of the equation. What's your goal? What do you want these properties to do for you?

Often people think DIY will yield better results.. and sometimes it may with savings. However, it may come with a costly price of a structure that may be difficult to fix later on especially with the current tightening. Best to set this right from the start, in line with whatever you're trying to achieve apart from saving a few bucks.

 

You might be equating rate with 'best', but these are some of the worst out there.

 

Better in terms of rate, or better in terms of structure advice?
A poor structure can cost you much more than you gain with a cheap rate - when buying IP's rate is always considered, but it's not the most important aspect. Getting a good valuation, using less cash, and having your loans secured correctly are things that most people don't consider when setting up their own loans and is where your broker should be guiding you.

 

Can someone tell me the disadvantages of online banks like reduceloans? I'm almost 3 years with loans.com and just refinanced to reduce loan. Cheap rate was the primary reason. I only see advantages so far?

 

No offset account
LMi on every loan. They paid for under 80%.
Must pass LMi sign off
Slow
Inflexible products
Difficult to borrow against equity
Higher discharge costs
Difficulty get a valuation done

 

If it’s set and forget they can be fine - issue is for accumulating investors that the inflexibility can cause issues and can be expensive to move.

 

Thanks All. Yes 80% needed to be there if I wanted to get any rates advantage. I do have a 100% offset (a bit confused now between a "true" offset and what they are calling an offset? i will investigate) with the properties (all of them). My main gripe with Valuation and equity release process was that it was handled by multiple people not just one and I had to wait an extra week or so to get it all together for my next purchase. The customer support was excellent though and i was never lost or confused with the process. But i am very thorough too. (i think)

 

Others: discharge is high for reduceloans (not an issue yet). The website for reduceloans is very basic, i cant just walk into a branch to sort out a problem and i had to manage the process end to end myself.

 

Jess, do you mind please explaining the poor structure part using an online bank vs one that is mainstream? Just want to check if there is something else i should be considering that i just didnt know about!

 

@Gypsyblood

Depends on your goals.

There are some lenders which allow alterations to loan structures relatively easily, whilst many others don't. Where changes can be made easily, there may be potential to save 100s if not 1000s over the the life of the loan.

Low rate or no fees sounds great on paper, but from what I have seen with clients, there is a bigger price to pay long term. Based on these interactions - it has been a case of - you don't know what you don't know.

 

More to do with longer term plans - using leverage appropriately and choosing the right lenders with the right policy is key to building a portfolio so it's important to plan carefully to make sure you'll have the resources you need, to buy when you need. When rate is the focus, often you simply aren't thinking far enough ahead to ask the right questions.

Also if taking a couple of properties to the same lender, they're likely to cross the securities but that's no different than going direct to any lender.

There's a couple of types of people who a low rate lender is often okay - those that have either a massive saving and servicing capacity and are putting down 20% deposits for everything, or those that aren't going to be buying anything else for quite a long time. Set and forget types.

 

Thanks for taking the time to respond Jess. definitely better in terms of rate only - there is no structure advice!
I've always got 20% deposit and my strategy is long term buy and hold. But I also plan to keep buying properties every year or so, and many of these lenders have huge discharge fees.
The idea of getting help from a broker with everything is appealing, but my logic tells me surely i should be able to get a better deal going direct.... I am learning that to make money now I need to bring others on board but the 'I can do it all myself' mindset is a difficult one to shift.

 

It is - I’m a recovering DIYer myself The tricky thing is you might be fine, by you won’t know until it’s too late if you’re not.

Sometimes the cost is not obvious - it’s hard to price the opportunities you miss out on.