Refinancing advice for PPoR...

We're regularly getting variable rates of 4.30% for owner occupied, interest only loans with an offset account.

Paying an extra 0.1% - 0.2% for an I/O loan is well worth it if the property is to become an investment and you want plenty of flexibility and future. There's plenty of stories on this forum where people paid down a home, turned it into an IP and could no longer get the tax deductions they'd hoped for.

To put it in numbers, a 0.1% difference in rate is $400 / year on a $400k loan. In an extreme case where the entire loan is paid off then you want it to become an IP, you'd probably miss out on over $5k / year in tax refunds by structuring as P&I without an offset account.

 

I'm getting 4.08% 5 years interest only for my ppor with bankwest. This is post the rate rise and is a current promotion they are running.

$395 annual fee. Includes offset account.

 

Again though, BW is a good rate, but as soon as you want to do anything in terms of equity out, it's really difficult due to both policy and servicing.

 

Makes sure you check back in 18 months. BankWest has a long history of having a cheap product then replacing it with another cheap product. The old product rate increases quite quickly after that.

They've consistently done this with every variable product since 2008.

 

Just spoke to bankwest, and they did confirm that the current offer mentioned a few posts ago is available on IO. IO is still what I would prefere but not at a big expense. This offer does seem reasonable. Comparisson rate for my situation would be around 4.19% factoring in the yeary package fee.

I also questioned them on whether the rate is introductory or not - I cited your feedback as a concern of mine. They said that on this product, it's a fixed percentage (1.57%) off std variable for the life on the loan. They said this would be provided in writing in the contract. Surely that can't be real? If this is indeed the case it does sound tempting in comparisson with other options I'm (still) tossing up.

 

I'm not suggesting it's an introductory rate at all. I'm simply pointing out that for the last 7 years they've continually rolled over their products. The new product has a killer rate and looks really good. A year or two later it's replaced with a new product and the previous product gets more expensive.

This has happened to every single variable product BankWest has offered. You won't find anything about it anywhere in their documentation, it's a pattern of behaviour they've followed consistently since early 2008.

Take a look at their website where you can find their home loan rates: Home Loan Rates

At the top you'll find the products they're currently offering, these are all competitive in their own way. Below the fixed rate loans you've got a couple more variable products like 'Mortgage Shredder' and 'Rate Saver' - all so expensive you'd never even consider them. Guess what they were promoting a few years ago? There's a whole list of other products that they're not even mentioning a few years ago such as 'Lite Home Loan' & 'Double Deal Home Loan'.

Perhaps their current product will break the pattern? I won't trust them until they've kept the same product with consistently competitive rates for at least 3 years. The current line up was introduced earlier this year, it should be fine for at least 6 months.

 

I see what you're saying. It is a little weired in comparison the other lenders. The don't seem to have anything that says just "Standard Variable Rate" on it's own (like the big 4 do) which this product is supposedly referenced off.

Are they legally obliged to have a standard variable rate? I would be ok if the only way to raise rates on this product is to raise their standard variable rate similar to how the big 4 are structured.

 

no

 

Their standard variable rate is the mortgage shredder rate...you can see it in brackets on their rates page.

The bankwest offer is great and I wouldn't be too concerned about the new products they release every couple of years. I've changed with no hassles and fees at all. They have been very good to me thus far.

 

I have been offered higher discounts if I bring over lending from one bank to the other. My current rates are terrible, split across two Banks, offset accounts and annual package fees..

Owner Occupied P&I 4.55%
Investment I/O 10 years 4.78%

 

@melbgal The investment rate isn't too bad, especially if the loan amount is low and lvr high. The ppor you can definitely do better though.

Be careful - if you're moving both properties to one lender and the rate is really low for both, the chances are high they are going to cross collateralise your properties.

Definitely not worth it for a low rate.

 

At this point you could do better, but you could also do worse. Having both properties with the same lender will give you more negotiating power on the IP, but on it's own you're actually on a reasonable deal.

The 10 year I/O period is also a fairly good deal, very few lenders are offering this. Your longer term plans would need to be considered before making the move to shift.

On the PPOR loan it's possible to get 20-30 points cheaper with or without the IP. This might be worth consideration.