Refinancing investment loans

Discussion in 'Loans & Mortgage Brokers' started by bobbyj, 7th Nov, 2017.

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  1. Perthguy

    Perthguy Well-Known Member

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    I am signing up for a new loan, P&I at 4.19%. As a comparison, my IO with another lender is 4.69%. It's quite a difference in rate.
     
    Perthguy, 20th Nov, 2017
    #21
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  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I've put together calculations of various scenarios showing the actual outcomes which take into account the tax. I can show good arguments for either side of the P&I vs I/O debate, even when there's not a large difference in rates.

    Realistically, the tax deductions isn't really a very big deal. It's really an argument of short vs long term cash flow. Interest only will improve your cash flow in the first 5 years, but after that it costs more. Over the life of the loan it costs you a lot more.

    In truth the best outcome really depends on individual circumstances, priorities and plans. There really isn't a best generic solution out there. What works for one person may not suit another.
     
    Last edited: 20th Nov, 2017
    Peter_Tersteeg, 20th Nov, 2017
    #22
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  3. pwt

    pwt Well-Known Member

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    Is your new loan variable at 4.19%? That's pretty good, I thought. My investment P+I variable rate is currently 4.3% with CBA. Time to shop around?
     
    pwt, 25th Nov, 2017
    #23
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  4. Perthguy

    Perthguy Well-Known Member

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    Yep. 4.19% P&I variable. Definitely a good deal
     
    Perthguy, 26th Nov, 2017
    #24
  5. pwt

    pwt Well-Known Member

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    Do you mind me asking which bank is offering that?
     
    pwt, 26th Nov, 2017
    #25
  6. Perthguy

    Perthguy Well-Known Member

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    St George
     
    Perthguy, 26th Nov, 2017
    #26
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  7. JXF

    JXF New Member

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    hi all, i am looking to refinance from IO to P&I as i think its more feasible for me to do so right now. These rates look appealing: Interest Rates | Pacific Mortgage Group -does anyone have any experience with PMG?
     
    JXF, 26th Nov, 2017
    #27
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Is it for a fully drawn loan or will u have YOUR money sitting in the lenders redraw ?

    ta
    rolf
     
    Rolf Latham, 26th Nov, 2017
    #28
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  9. JXF

    JXF New Member

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    I'm not sure what you mean exactly? but it has it has unlimited redraw at no cost?
    more details below...

    Borrower Suitability This loan is suitable for our investment clients looking to purchase a home to live in, refinance their existing mortgage or consolidate their debts

    Loan Amount up to $5,000,000
    Loan to Value Ratio 80% No Mortgage Insurance (up to $5 million)
    80%-90% with Mortgage Insurance (up to $850K)
    Term 1 to 30 years
    Interest Rate Type VARIABLE rates are available
    Repayments Principal & Interest | Weekly, Fortnightly or Monthly
    Repayment Methods Direct Debit/Direct Salary Crediting
    Redraw Facility Unlimited redraw transactions, with no maximum limit at no cost. Accessible 24hrs after lodgement
    Account Access Net/Phone banking | ATM/EFTPOS | BPAY® | Direct Debit Card
    Application Fee Nil
    Valuation Fee Nil
    Settlement Fees Nil
    Monthly & Annual Fees Annual fee of $120 is charged on settlement, PMG then rebate this fee ongoing on an annual basis
     
    JXF, 26th Nov, 2017
    #29
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Speak to your accountant about redraw, and get a copy of the terms and conditions of the loan before you apply.

    With Most non Banks, and in fact most banks ( using redraw) your money becomes their money.

    Typically, an ADI with a proper offset account that tends to be a better for both tax and risk management purposes, since the fed gov will guarantee the content of the offset to 250 kI recall.

    I you are going to have 10 bucks in the offset, none of this matters - right now.

    Often, the "real price" of something isnt really felt until we are well down the track and have lost the opportunity, or not been able to meet a challenge.

    Basic set and forget loans are very suitable to some people,and their current needs.

    Setting up portfolio growth finance isn't like buying a consumer durable such as a fridge. Rate is often the last /least consideration.

    ta
    rol
     
    Rolf Latham, 26th Nov, 2017
    #30
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  11. JXF

    JXF New Member

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    thanks for all the info! there is a full offset account as well so i guess that's a good thing :)
     
    JXF, 26th Nov, 2017
    #31
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If your offset is full what does it matter that the rate is high?
     
    Terry_w, 26th Nov, 2017
    #32
  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Semantics with many non banks

    They cant have a discrete offset account like a bank


    They typically call them "redraw/offsets".......... make from that what you will.


    if the lender is not an ADI ( ie regulated by APRA) there is no guarantee on YOUR funds ( at least as far as I know)


    ta
    rolf
     
    Rolf Latham, 26th Nov, 2017
    #33
  14. Dean Collins

    Dean Collins Well-Known Member

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    what are their 5 year rates like?

    I think anyone re-financing now is going to find that in 2 years.....they'll be in a position where rates are higher, eg better to go for 5 years to get over the next tightening cycle.

    If course....I could totally be wrong and you can refi again in 2 years for less than I'm looking to commit for 5 years.
     
    Dean Collins, 27th Nov, 2017
    #34
  15. bobbyj

    bobbyj Well-Known Member

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    4.69% for 5 years

    I considered fixing for longer but the shorter term suits my current investment/life plan better.
    The worst thing would be having to pay my way out of a fixed loan and end up with tens of thousands of $ in breakage fees (if not more!).
     
    bobbyj, 27th Nov, 2017
    #35
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