What rates can I get?

Hi,

Looking for advice on what rates we should be expecting with refinancing the below loans?
Broker has indicated high 3's IO. Is this the best to expect?

We are saving for PPR, so Cash flow/ savings are king for us at present, so we can pay down PPR as quickly as possible.

Currently using offset against IP3 for savings.

IP1 - Value 730k, loan amount 478k, ~7 years IO left @ 4.1%. CBA

IP2 - Value 610k, loan amount 350k, ~7 years IO left @ 4.1%. CBA

IP3 - Value 600k, loan amount 380k, P&I repayments @ 3.5%. BankWest. May look to sell this depending on serviceability constraints when looking for PPR.

IP4 - on market to sell to improve serviceability for PPR.

Plus preapproval for PPR.

Cheers,
Ardi

 

Best to refinance the Bankwest loan to an IO product as it will have the biggest impact on your cashflow - leave the CBA loans as you have 7 years IO on them and when refinancing you're likely to only get 5 straight off the bat (hard to know for sure without knowing total financial situation)
between 3.5% - 4% for Investment IO loans is what you should expect, depends if you qualify for certain lenders - your broker could help you with this

 

I know everyone is different, but I'd prefer P&I at 3.1% over IO at 4.1%.

 

I was thinking the same, but the P&I was still a bit too high given we will likely have a substantial PPR loan in the near future. (Using CBA calculator).

If it was only marginal the P&I would be a given.

 

CBA have just released 3 yr fixed rates 3.39 IO - bloody good! Variable is still higher at the moment.

 

Cashflow difference between 3.1% P&I Vs 4.1% IO is $299 per month based on $350K loan and $408 for 478K loan
Combined cash flow difference = $8484 per year

 

4.1 is way too high for IO INV variable at the moment. Mid to high 3’s is more realistic, depending on lender.

 

Jess, will they do this with IO for 5 year period? Does it have offset account?

 

Yes, good to be paying down debt. But that is also 8484 that could go towards non-deductions debt.

 

Yep - that's what I was demonstrating, you could use the saved money towards the PPOR Non deductible debt, even with the higher rate you still are better off with IO from a cash flow perspective.

They will allow 5 years IO with initial 3 years fixed - no offset during the fixed period - offset applies when it reverts back to variable rate.
As you already have 2 of your loans with CBA it would be simple to apply the 3 year fixed rates to them, wouldn't need to refinance.

 

Long term is to pay off PPR and build net wealth to allow FIRE as early as possible.

Aim is to buy PPR in next 12 months, max ~750-800k. Then work hard on paying that down as quickly as possible.

Plan on holding IP's for minimum 5 years if possible.

Thoughts are if we can get rock bottom interest rates so that we can save then pay down PPR as quickly as possible.

 

No, not specifically. I am purely looking to pay down as quickly as possible with savings, low rates and offset.

Given we already have IPs positively geared, and capital , is there much opportunity?

 

Would you consider a fixed rate ?

We just got offered 3.19% for 1, 2 or 3 year fixed with CBA.

Assuming you have the Wealth Package - best offer on variable was 3.79%.

But we are also on P&I which might impact the offer.

 

3.19% is the advertised 1, 2 or 3 year fixed (this recently changed)

Noted that's P&I believe OP is looking at IO which would be

3.39% 1, 2 or 3 year fixed.

 

Your right it is P&I - I added that to my post in between.

What would be the offer for IO fixed ?

Surely a lot less that 4.1% - 1 year goes by pretty quickly !

 

No offset on fixed, but rates are below. Pretty amazing 5 yr fixed.