Refinancing to a non-bank lender - any risks?

Discussion in 'Loans & Mortgage Brokers' started by Magnet, 28th Jan, 2017.

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  1. Magnet

    Magnet Well-Known Member

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    Would there be any risks refinancing all loans to a non-bank lender? Aside from interest rates possibly being a little higher is there anything else to be wary of?
     
  2. Terry_w

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

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    They are more likely to sell the debt so who you are dealing with now may not be the same as next year.

    I think RAMS did this years ago and people won't happy.
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Non bank means different things depending on the lender :)

    In general, not great if you have lots of cash to put back into the loan or the "offset" because your money becomes their money.

    For a fully drawn advance IP loan that risk generally doesnt exist

    ta

    rolf
     
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  4. Magnet

    Magnet Well-Known Member

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    We're not fussy where our debt comes from as long as we can meet the IO payments!
     
  5. D.T.

    D.T. Specialist Property Manager Business Member

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    I had a home loan that was sold to Macquarie in the mid 2000s and they were trying to exit residential lending at the time, so they put their rate up every 2nd month to see who'd leave.
     
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  6. Magnet

    Magnet Well-Known Member

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    Looking for a way forward with serviceability and waying up the options of saving a deposit over the next 12 months or refinancing to someone with a kinder calculator if it exists for us. We won't be paying down too much debt in the short term as we are in accumulation phase. Anything we save will be directed toward buying more property. Also trying to way up the opportunity cost of having to wait 12 months to save a deposit versus using equity now.
     
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  7. Magnet

    Magnet Well-Known Member

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    That's not cool! We're expecting some rate differentials and rises but trying to weigh the pros and cons and pick the best option.
     
  8. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I'd be more inclined to move some but not all - it's actually better for servicing and will reduce your risk long term in the event the non-bank sell out/goes nuts with rates etc.
     
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  9. Magnet

    Magnet Well-Known Member

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    Ideally we would refinance our largest loan to another lender as that's the one we would like to use some equity from.
     
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  10. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Really depends on which non bank lender we are talking about. If its a lender like Liberty then I would have some concerns which I would like mitigated. They are getting massive market share as they have a number of niche's and its not just their servicing/borrowing capacity model.

    A lot of people are refinancing to Liberty and one would wonder what will stop Liberty from increasing their rates in the future when most customers don't have the ability to refinance out to another lender. They are small and nimble enough to make these sudden moves. Just consider something like this before making the move.
     
  11. Magnet

    Magnet Well-Known Member

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    Definitely food for thought. This makes a lot of sense as let's face it there goal is to make $$$.
     
  12. 8691

    8691 Member

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    I've personally borrow from the big four, through to private mortgagee's. It's all about making the deal work and building wealth. Sometime you have to take what you can get at the time.
     
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  13. Redom

    Redom Mortgage Broker Business Plus Member

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    Factor in more variability into the interest rate projections you put in place.

    The likelihood of random rate rises in the future from non banks that are winning investor market share is quite high. Simply investors won't have many places to go, so competitive forces will allow them to gauge and price higher.

    Add 0.50-1% to the current rate modelling as a safeguard and be prepared to pay it in future if stuck and unable to refi.
     
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  14. Magnet

    Magnet Well-Known Member

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    I guess it's all a matter of taking opportunities and running with them. Better to move forward than not at all.
     
  15. Magnet

    Magnet Well-Known Member

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    We always assess deals with a buffer for interest rate rises. Can't hurt to increase this buffer for future deals. It's a good way to mitigate or assess the risk involved. Thanks @Redom
     
  16. Magnet

    Magnet Well-Known Member

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    I'm glad we atleast have the option of other lenders in the market but we will tread with caution.
     
  17. Corey Batt

    Corey Batt Well-Known Member

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    Any lender risk is limited to your ability to leave them via other lenders and the cost associated with leaving. With DEF's gone for quite some time, the primary cost is breaking of fixed rates, so if you ever feel that theres an inferred risk with a particular lender, keep the interest rate variable.

    In reality most investors who are looking at other options such as non-banks are doing so for serviceability reasons - in which case it's the option of continuing their investment journey OR not borrowing at all.

    The most prudent option of all is keep the debt reduction on your non deductible debt going, grow your cash flow and have a long term plan which goes beyond depth of "buy properties and wait".