Refinancing advice for PPoR...

Looking to refinance my PPoR and was hoping I could get some advice. Current loan is $486k, prop value about $550-560k and have decent cash reserve in the offset.

I'm currently with NAB on an IO variable choice package. Current rate is an ABSURD 5.19% - so I must refinance. I no longer need any of the other benefits that the choice package did (or didn't) offer.

I called NAB and asked to get best pricing for a better deal. I asked for pricing on split a fixed / variable P&I (236k 3yr fixed, 250k variable+offset). They did OK on the fixed (4.10%) but didn't really want to play ball on the variable (only 4.61%). Now I'm not so sure I want to go fixed as there doesn't seem to be any need to. The general economic outlook does not look great and there are better deals out there on variable ATM

Not looking for much in the loan - I'm just after a loan with a good rate, 100% offset and easy access to the funds in the offset as it will be my primary transaction account. Also happy to switch to P&I given recent regulatory changes with IO loans yielding better deals for P&I loans and going down to an 80% LVR is fine if it can yield a better deal.

I've come across the following deals which meet the minimum criteria and look promising:

• ING Orange Advantage - 3.99% (to go up 0.18% soon) (Has annual fee)
• Suncorp Home Package Plus - 4.30% p.a. (Not sure if rate already went up)(No annual fee for life of loan and some cashback)
• State custodians Std Var - 3.99% (Not sure if rate already went up)(Has annual fee)

I was hoping I could get some advice about these deals/lenders and/or advice about other deals that are available out there.

Cheers
Hani

 

HI Hani,

Macquarie have a white label product at the moment (Vow Home Loans) which is very competitive rate wise, (4.04%) offset account, no annual fees for the life of the loan and also good cash out under 80% if you need to access equity down the track. It's my current favourite for PPOR's as it still gives enough flex if you need to invest further where Suncorp and ING are pretty restrictive for investors.

This is a special though, it's only on offer until the end of the year. Going down to 80% LVR is beneficial in terms of rate and also b/c it means you won't have to pay LMI again.

 

Thanks Jess,

I hadn't come across that one. Is that advertised somewhere or only available through brokers?

Has their rate moved yet in line with the others or not? And are there any establishment fees?

 

Through Vow brokers only. Their rate will not move until April, when it will go up 0.21% - they're trying to hold off as long as possible it seems
The only upfront fees are to cover legal, and that totals $363.

 

Hi Hani,

It seems like you are trying to do your own research which is great but there are hundreds of products and numerous lenders to suit everyone's needs. Firstly is it the property you live in or an investment because rates vary for owner occupied or investment properties. You can also split your loan to allow flexibility & 100% offset.

Regards,

John Kalantzis

 

This is my PPoR which I am living in.

I know things have changed since I took out the loan a few years agoy which meant the OO loans are more competitive than investment loans so it's worth the effort to refinance now.

I am not partial to doing the work myself or going through a broker - I'm just having a look myself for now.

 

Hani,

One thing to be mindfull of is we get paid by the lender so there are no upfront costs from us to you when we introduce your loan to the lender of your choice.
Today 52.6% of mortgages in Australia are done by Mortgage Brokers, when I started in 1999 it was more like 10%,

Happy to help

John

 

That Macquarie offer is with a few other aggregators too - not just Vow brokers. Just a different name for the same product.

 

I thought that was possibly the case but didn't know if it was exactly the same with other aggs or not.

 

Thanks - the original loan on this property was funded via a broker. He is no longer in the business so I don't have a go to broker right now thus me having a look around myself first.

 

Hi Rolf,

Good to see you still kicking around. Not sure if you remember me but you helped me out with a few reports and advice back in the day which was much appreciated.

My situation has changed somewhat since I bought this property and I'm pretty sure all I need now is just a good rate with a 'real' fully accessable offset account - a fully featured tractional account with BPay access, debit card for day to day banking. It seems there are quite a few lenders that have such an offering right now.

 

I do have a couple of questions about any applicable refinancing fees.

I do remember that the current loan settled just after 1 July 2011 so the old exit fees had been abolished by then but I'm not sure exactly what else is applicable.

A. What fees are usually payable to the current lender when refinancing with another lender? (in particular with NAB on a variable IO under choice package?

B. What fees will usually need to be paid to the new lender for a refinance? Will they need to do a valuation? Obviously, some will be lower than others so I will need to factor this in to the equation...

 

Current lender will have a discharge fee - from memory NAB's is about $350. Many lenders are waiving application fees atm, but usually there's a legal fee in there that can be from about $200 upwards.

In most cases I'd budget around $1000 for a refi, but some lenders have specials or rebates that can reduce this cost.

 

I have one other question. I asked NAB about it but I'm not sure the answer I got, from the person I spoke to there, was correct.

Regarding P&I loans with an offset, is the P component of the monthly payment calculated on the full loan amount regardless of any offset or is it calculated on the full loan amount minus offset?

For example if I have a 400k loan with 200k in the offset, will the total monthly payment be exactly half the amount had there not been an offset account? Or is any interest saved by having the offset just automatically dumped onto the loan as an extra repayment?

Is it the same for all lenders?

 

I think I'm settling on Vow Loans as the best option for my circumstances.

I've read that some brokers are able to get 3.89% on this product at the moment (which goes up to 4.09% in a few months), apparently to compete with ING and the like who are offering sub 4% at the moment. Is this rate for real? If so it's pretty competitive.

 

Keep in mind that this product is only really suitable to a fairly narrow set of circumstances. Owner occupied, principal & interest, with a lender that's terrible for the ongoing requirements of the investor segment. Nice if you want a set and forget home loan, but it really doesn't work for investors.

A long term client who we're writing a large loan for right now mentioned she's got a friend who's just become a broker and offered her this product. What we're putting together is about half a percent more expensive. I pointed out that she's buying an investment property and wants an interest only loan (which will have better cash flow than P&I despite the rate difference). That's irrelevant however. With their existing debts, income and looking at the whole picture, they simply don't qualify for a loan with most lenders. Vow, ING, Macquarie, etc wouldn't lend them $10, let alone $1M.

Mortgage broking isn't about discussing interest rates. Newbies often make the mistake of talking about a cheap headline rate. It's really about finding the best fit to meet the needs and goals of the borrower. Cheap rates are always important, but in the current market the first question is who will actually lend the money and under what circumstances. Once that's been figures out, then the cost of the loan comes into it.

 

Yes that's right.

 

Thanks Peter. That is my situation exactly. It's my PPR and apart from a desirable offset account the only other feature I'm looking for, for this loan, is a sharp rate. Personally, I would prefer IO (current loan is IO) but in today's lending market, this is no longer viable due relatively higher rates on IO loans across the board.

 

Thanks Jess