U Bank to refinance investment loan

Hi
Currently with CUA on an interest only loan at 3.74%

U Bank are doing this for 3.3%

I'd like to switch to save $115 each month but just a little nervous about them

Researched a little and a lot of negative reviews about their customer service and online system
I mean it should mainly be set and forget but if there's an issue or I have to change something it could be hassle

Any opinions of them or other recommendations?
The below is the loan rate I am looking at from U-Bank

 

It’s a three year fixed rate so check what the variable will be after it ends.

There’s costs of refinancing too - usually around the $700 to $1000 mark

Cheers

Jamie

 

Thanks ill work out what I end up saving with U-Bank over 3 years vs costs to switch. I thought it was just $300 which it says on their website

If I change to a better rate with my current bank its a $300 fee

 

$300 is their cost. There's also the cost of leaving your existing lender, plus government costs of transferring the mortgage. All up it is usually $700 - $1000.

I have a rule of thumb. If it takes more than 12 months to recover the cost of moving, you need a better reason than a cost saving to move. A year from now 3.3% might be considered expensive. This case would be marginal.

Realistically 3.74% is quite competitive for a variable investment loan. It's a lot better than the 4.19% UBank is offering.

 

Yes its ok, but thats 3.74% 3 years fixed from CUA not variable. You answered your own question in regards it may be expensive in a year. U Bank is 3 years fixed at 3.29%

II have worked out ill be saving $1200 per year

Thanks

I will ask CUA ( my current bank what it costs to break out of it)

I called U-Bank and got the following info:

The additional fee's Ill have to pay for switching over is a government charge of 2 x $117

after paying 2 x $117 and $395 switch over. There is no additional fees from U Bank after that

after 3 years it defaults back to their variable rate which is currently 4.19% which is still much cheaper then my current banks defaulting variable rate ( hence my change )

There is no fee also to switch back to fixing rate with U bank

question I forgot to ask though. Is How do I service the loan? They dont have savings accounts linked to the home loan accounts. How do I put money from my pay in there so they can deduct it every repayment?

 

I’m pretty sure they have savings accounts. You should be able to setup a direct debit from UBank transactional account into the home loan account.

The transactional account can have an auto sweep to top it up before the amount is withdrawn. This is so the transactional account has enough funds for mortgage payments.

Give them a call to get this explained if it is confusing.

 

Sorry, I assumed your existing loan was variable.

I agree with your annual saving figure but I suspect the break cost will make it too expensive to justify moving.

I'm fairly certain the UBank would allow direct debts from external transaction accounts.

 

No Need to be sorry at all

Your helping me lol

I get a bit confused with all the banking terms. I called CUA and told them about my justification for wanting to move. They asked for a chance to be competitive so of course I told them what other offers I am looking at. I told them its 3.29% IO and yours is 3,79%

The home loan consultant was a bit in disbeleif in what I got offered so I told him who the bank was and he checked.
Then he said dont look at that fixed rate look at the comparison rate of what they are offering which is 4.07% p.a.

I think he could offer a better comparison rate but have to get them to call again tomorrow to confirm it

Whats your take on that?

U banks comparison home loan rates and info are here:
Compare Home Loans and Mortgages - UBank

 

Yeah, consider the comparison rates.

I haven't looked at Ubank or anything else, but a quick example below. Bank 2 may look better having a lower interest rate, but may cost you more over the term of the loan because of fees etc:

Bank 1:
Interest rate - 5%
Yearly fee - none

Bank 2:
Interest rate - 4.9%
Yearly fee - $500

The comparison rate shows you the effective rate you will be paying over a certain period, inclusive of fees etc. to allow you to make a more informed decision.
Just because the interest rate is lower than another banks product, doesn't mean you're going to pay less.

 

I think comparison rates are a bit of a scam which have little relevance these days.

I also think there's better deals out there than UBank or CUA. There's other lenders with similar pricing but better products and focusing just on rates is a trap.

But all that said, I still think your break costs are going to be too high to make refinancing worthwhile at this point in time.