Which mortgage option?

Discussion in 'Investment Strategy' started by Cmelderis, 19th Nov, 2019.

Join Australia's most dynamic and respected property investment community
  1. Cmelderis

    Cmelderis Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    480
    Location:
    Perth
    Hi All,

    Bit of a back story firstly.
    Partner and I are buying our first PPOR contract of sale is signed, deposit being paid this week.
    We earn 220k between us
    House will become an IP in 2-5 years
    We save approx 6k a month, this may increase.Current savings approx 80k
    We want to buy an IP on east coast before June 2020 this is the reason we are going 95% on our mortgage
    ( keeping funds for IP deposit )
    My broker has sent me some options below, the St George one has redraw but no offset
    Looking for all comments/feedback/things to bear in mind
    Thank you wise PC'ers


    upload_2019-11-18_14-21-17.png


    upload_2019-11-18_14-21-55.png
     
    Last edited: 19th Nov, 2019
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    35,801
    Location:
    Australia wide
    Since a main residence you might want to go offset. I would be keen on AMP myself for their debt recycling ability
     
  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    7,281
    Location:
    03 9877 3000
    The St George basic option has been offered because it's got a very low rate.

    If this property will become an IP later, and you've got the ability to continue saving, an offset account will likely be worth more in the long run than a saving of about $1k per annum.

    For a mix of good rates with an offset account, the AMP offer is the most competitive your broker has suggested.

    Personally I wouldn't bother with 95%, the LMI premium would be far too high. For every dollar above 90% you borrow, you're paying almost half that back in extra LMI.
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    3,597
    Location:
    QLD/Australia Wide
    You've engaged a broker, trust they know what they're doing
     
    Cmelderis and Terry_w like this.
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,769
    Location:
    Canberra, Brisbane and Sunshine Coast
    Bingo.

    Try to bring that base LVR down to 90% - or even better - 88%

    Cheers

    Jamie
     
  6. Cmelderis

    Cmelderis Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    480
    Location:
    Perth
    I do trust but as you see they’ve given me various options so I was just looking for advice
    A lot of people on here are far more experienced than your average broker
     
    Rugrat and Perthguy like this.
  7. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    35,801
    Location:
    Australia wide
    Too many options are not good. I usually give just 3 as it becomes confusing otherwise
     
  8. Cmelderis

    Cmelderis Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    480
    Location:
    Perth
    Plus I’m a Gemini I can never decide on anything lol
     
    Kelvin Cunnington likes this.
  9. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,389
    Location:
    Sydney NSW
    As eluded to above that magic 88% mark is where you're maximize your LMI efficiency. I'd run the numbers on balancing LMI between the two purchases versus tapping out at 95% on purchase one.

    The first 4 options in your table do not show the capitalized LMI amount either?
     
    Cmelderis likes this.
  10. Cmelderis

    Cmelderis Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    480
    Location:
    Perth
    I *think* in order to get to 88% we would need to put down around 65k? As stamp duty is 12.25k....this may sound ridiculous and stupid but mentally I dont think I could say goodbye to that much $$ right now
     
  11. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,389
    Location:
    Sydney NSW
    I don't know your exact numbers but rough beer coaster sums say you'll cut your LMI in half from $12K to $6K and if you can cap the IP purchase at 88% assuming the same numbers you'd need the IP to be at 80% if you were at 95% for OO purchase....
     
    Cmelderis likes this.
  12. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    3,597
    Location:
    QLD/Australia Wide
    Then use a broker from this website? Problem solved
     
    mikey7 likes this.
  13. IpNoob

    IpNoob Member

    Joined:
    4th Nov, 2019
    Posts:
    12
    Location:
    Melbourne
    Hi guys,

    Since we're discussing on mortagage options, thought that I can post a question in this thread instead of creating a new one

    Currently I'm with a major bank and looking to get finance for my next investment property. I've got a pre-approvals from my current bank and Firstmac which was recommended to me by a broker.
    The rate Firstmac offers is about 0.5% lower than then bank my questions are:

    1. If I found the property and both the bank and Firstmac are willing to lend me the money, which one should I go for? Given they both have the offset account facility.

    2. Again in case I have signed a contract, can I ask both Firstmac (through the broker) and the bank to assess and provide me a formal loan approval then I can decide which one is a better one to go for? Or I can only choose to go with 1 specific creditor at a time before settlement?

    Thanks PCers
     
  14. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,389
    Location:
    Sydney NSW
    You need to make a decision at some point as to which lender you're going to use - I would suggest this is the point at which you can confidently make that choice. The only possible upside I can see in having two pre-approvals is if the valuation comes in low with your preferred lender and you've got a plan B. More harm than good otherwise :)
     
    IpNoob likes this.
  15. IpNoob

    IpNoob Member

    Joined:
    4th Nov, 2019
    Posts:
    12
    Location:
    Melbourne
    Hi Morgs,

    Thank you for your opinion.
    When you say the point which I can confidently make a choice, can that be after both the bank and Firstmac offer me an unconditional loan approval?
    I know that the lender will need to do a full assessment plus a valuation on the property before it comes to this stage. So everything is not guaranteed before it in my opinion.
    But I'm not sure it's a good move as I have to refuse an offer from one of them.
    Cheers
     
  16. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    35,801
    Location:
    Australia wide
    Will they charge you if you pull out? A bank prob won't but Firstmac might.
     
    IpNoob likes this.
  17. Kelvin Cunnington

    Kelvin Cunnington Well-Known Member

    Joined:
    18th Nov, 2019
    Posts:
    361
    Location:
    Australia
    I'm no expert like others in this thread, but casual impression is:
    * Income level gives you the ability to very quickly save enough to go for the 90% loan without LMI,
    * Go for an offset.
     
  18. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,389
    Location:
    Sydney NSW
    For many lenders pre-approval is fully credit assessed and the only thing you need for formal approval is an acceptable security/valuation. I don't have Firstmac on panel so I don't know if they fully credit assess pre-approvals or who your other lender is. Is there something specific you're worried about that is potentially going to hold back progressing to formal approval?
     
    IpNoob likes this.
  19. Silverghost

    Silverghost Well-Known Member

    Joined:
    18th Sep, 2019
    Posts:
    52
    Location:
    Melbourne
    Up to a point. The person with the biggest stake in getting things right with any services (whether it be a broker, tradie or doctor) is you, so don’t be afraid to check or question things to make sure you are comfortable the outcome will meet your needs.
     
    Cmelderis likes this.
  20. IpNoob

    IpNoob Member

    Joined:
    4th Nov, 2019
    Posts:
    12
    Location:
    Melbourne
    Good point. I haven't checked this. From Firstmac pre-approval, it doesn't say what happens in this case yet. I'll have to check with them to see what they say.

    There is nothing too specific at this stage as my situation won't change. I'm just a bit cautious that the valuation of the next property/security may be below my purchase price which can affect the loan.
    Also I want to avoid if possible the case which the lenders have done their work and agree on providing an unconditional loan but I refuse to take the offer. Will that leave a mark on my credit file?
     

PFA Property Expo is designed in a way that visitors can gather maximum real estate knowledge with added benefits. Different speakers will be presenting on different topics as where to buy, when to buy in this market...