To take introductory rate or not to take introductory rate

Hi All,

I'm doing a refinance on my PPOR which is with CBA. I have decided who to go with, however they gave me two options....

1. Take introductory rate of 4.09% for 3 years and no fees after that it will revert to whatever the rate is in 3 years. Interest only
2. Take 4.18% no fees and this is with the discount for the life of the loan. Interest only.

Which one would you pick and why? what are experiences with people on introductory rates when they come of the honeymoon period after 3 years?

Cheers

 

Banwest yeah?

Have you see the reverting rate?

Be prepared to refi away after the 3 years is up.

If you're after a low rate - go for it. If you need more flexibility (such as releasing equity) I wouldn't go near them.

Tell CBA you're refinancing and see if they can do a better deal for you.

Cheers

Jamie

 

Number 2 for sure. That's a great rate and no fees is a winner. But as Jamie says, make sure the lender will work for you long term, or it could end up costing you a lot more than the few percentage points you save in rates.

 

Thanks for pointing that out guys. If a deal sounds to be too good to be true... well you know the rest.

I will go for number 2 option. So far they have been good, I'm refinancing from CBA to Bankwest (Jamie you are right). They are valuing the property at the same value as all other lenders and are letting me release the equity. You are saying that any future equity release will be difficult? Serviceability wont be an issue.
You think they wont value the property at what its worth?

 

The thing with BW is if you want to use the released funds for a new purchase, they'll want to see that you service the whole new IP debt on their calculator, not just the equity release. It might not be a problem this time around, but once you have a couple of properties it's highly unlikely you'll be able to get the funds unless you're on a huge income - they have one of the least generous servicing calcs.

 

Thanks for letting me know Jess. I will run through few scenarios to see how it will work.
I plan on using them just or this one loan. If I plan on buying another property it will be through a different lender. I would just ask BW to release any equity gained (lets assume I tell them its for holiday). I don't plan on using them for any future loans.

 

i'm with cba on 4.39% rate saver for 3 years. how would this effect flexibility as in with releasing equity as it's still a variable rate?

i thought you'd only have problems with fixed rates.

 

That particular product with the CBA works well for small loan amounts when compared to other products they offer. There's nothing stopping you from switching to another product with the CBA after that 3 year period ends. There's no penalties for switching or refinancing earlier.

Overall my feelings are that every BankWest variable loan is essentially a honeymoon product. BankWest have a long history of changing their flagship product about every 2 years. The rates on their older products then increase. It makes for good headline rates but relies on the borrower to actively switch products (for a fee) on a regular basis.

Right now there are plenty of great deals out there for owner occupiers with lenders that are much more honest with borrowers than BankWest.

 

ok so i wouldn't have any issues releasing equity?

 

You'll only have issues if you can't service - or another policy change comes from left field or similar. There's no issue with the product.