Need home loan advice

[Simon_Nesbit]

Not directed at you Guju but rather more generally. I mentioned it briefly earlier but want to elaborate.

This concept of "Investing" - whether it be real estate, shares, bonds, etc - heck, even just putting it in the offset account or term deposit.

Most is actually "Gambling". You can do a lot to put the odds slightly more in your favour, but you are still playing a game where someone else is making (and changing!) the rules, and you have minimal influence on the board.

Make a realistic assessment of yourself - what are your strengths and weaknesses - find good people around you to help where you are weak, or lack exposure. A good Broker, Financial Planner, Accountant/Tax Agent, Property Manager, Real Estate Agent, Tradesmen, etc. Build your 'team' that can help you. (They will all make money by helping you be successful).

1. Invest for a purpose or goal - Know WHY you are investing not just because you can or think you should.
2. Research/Educate - you need to be smarter than the market. People get lucky all the time, but you cannot rely on luck.
3. Plan and Review - made a bad investment decision? Don't make another one by simply leaving it to rot - actively review and restructure your investment plan constantly.
4. Draw on your expertise/interest/talents. If you aren't a wannabe tradie - don't take on a renovation project. If you aren't a designer don't look at up-market reno, if you aren't a builder/developer - don't take on a development project. Most, if not all of these projects that end up successful are due to an inherent skillset of the person in charge (or luck).
5. If you do NOTHING else, play safe. PATIENCE. Standing still you will go backwards slowly, but that's better than stepping into oncoming traffic.

 

[Guju]

Hi Simon,
Some fantastic points you made in regards to goal setting, risk management, and living life. Cheers.

 

[Lord of the Pies]

5 years ago I had to move quickly on an investment property, and could not wait for my regular lender ING for approval, so ended up with a loan from ANZ.
I have had rates locked and paying interest only, but are now switching to a variable rate with principal and interest payments.

ANZ sent a letter out informing me that that the locked period is ending and my loan would be switching to 5.1% interest rate. After a quick phone call rates were renegotiated to 3.6%.

I have never locked rates in before, is this normal behaviour for a bank? With my other loans ING rates have always seemed fair and were in tune to the reserve banks rates, more or less.

Is ANZ a dodgy lender? Is ING a good lender? Who are the fairest lender's? Who are the Worst?

 

[Halloween Jack]

5 years ago I had to move quickly on an investment property, and could not wait for my regular lender ING for approval, so ended up with a loan from ANZ.
I have had rates locked and paying interest only, but are now switching to a variable rate with principal and interest payments.

ANZ sent a letter out informing me that that the locked period is ending and my loan would be switching to 5.1% interest rate. After a quick phone call rates were renegotiated to 3.6%.

I have never locked rates in before, is this normal behaviour for a bank? With my other loans ING rates have always seemed fair and were in tune to the reserve banks rates, more or less.

Is ANZ a dodgy lender? Is ING a good lender? Who are the fairest lender's? Who are the Worst?

mate, they are all a bit dodgy.
my advise is to check the rates and ring your bank at least once a year to request a review or you will refinance to xxx (a quick google will give you an idea of what rates are out there).

Or engage a broker who will do this on your behalf.

We see clients who have done nothing for 4 years or so and were probably on a good rate when they started but are now on shocking rates. ING are pretty good, but even with them I have had success getting lower rates for my clients there.

Or to put this simply, don't just get a loan and do nothing thinking the bank is doing the right thing - they are not!

 

[Hamingja]

5 years ago I had to move quickly on an investment property, and could not wait for my regular lender ING for approval, so ended up with a loan from ANZ.
I have had rates locked and paying interest only, but are now switching to a variable rate with principal and interest payments.

ANZ sent a letter out informing me that that the locked period is ending and my loan would be switching to 5.1% interest rate. After a quick phone call rates were renegotiated to 3.6%.

I have never locked rates in before, is this normal behaviour for a bank? With my other loans ING rates have always seemed fair and were in tune to the reserve banks rates, more or less.

Is ANZ a dodgy lender? Is ING a good lender? Who are the fairest lender's? Who are the Worst?

I think most banks these days revert to the standard variable rate after the fixed period ends. That's why the comparison rates for fixed loans are higher. Banks just preying on people being lazy and not noticing or that they can't be bothered doing anything about it. Being an existing customer means nothing, in banking as with telcos, insurers, utility companies etc you are always better off shopping around as the good deals are for new customers.

If ANZ have given you a variable rate of 3.6% for an investment loan it is not completely terrible but would be plenty of better offers out there. You just need to weigh up the refinance costs - application fees, mortgage discharge and registration fees, settlement fees etc - and whether you end up in front by refinancing to a better rate as you probably have two years at the new lender before the rate becomes uncompetitive again. A lot of banks will give you a refinance rebate of $1500-$2000 which covers them.

 

[Cruyff14]

5 years ago I had to move quickly on an investment property, and could not wait for my regular lender ING for approval, so ended up with a loan from ANZ.
I have had rates locked and paying interest only, but are now switching to a variable rate with principal and interest payments.

ANZ sent a letter out informing me that that the locked period is ending and my loan would be switching to 5.1% interest rate. After a quick phone call rates were renegotiated to 3.6%.

I have never locked rates in before, is this normal behaviour for a bank? With my other loans ING rates have always seemed fair and were in tune to the reserve banks rates, more or less.

Is ANZ a dodgy lender? Is ING a good lender? Who are the fairest lender's? Who are the Worst?

Speak to a broker.

 

[Scotland]

I think most banks these days revert to the standard variable rate after the fixed period ends. That's why the comparison rates for fixed loans are higher. Banks just preying on people being lazy and not noticing or that they can't be bothered doing anything about it. Being an existing customer means nothing, in banking as with telcos, insurers, utility companies etc you are always better off shopping around as the good deals are for new customers.

If ANZ have given you a variable rate of 3.6% for an investment loan it is not completely terrible but would be plenty of better offers out there. You just need to weigh up the refinance costs - application fees, mortgage discharge and registration fees, settlement fees etc - and whether you end up in front by refinancing to a better rate as you probably have two years at the new lender before the rate becomes uncompetitive again. A lot of banks will give you a refinance rebate of $1500-$2000 which covers them.

Banks don't care about existing customers. I know this, my broker knows this, my friend who works for a bank and is frustrated by this knows this.

Their focus is new business. Offering 0.5% or 1% under the going rate for two years is nothing when you consider you'll just get the going rate for the remainder of the loan term. Even if you do get customer churn the return on each P&I loan decreases over time anyway. Every new loan gives you the opening balance on which to charge interest.

If it was me I'd be more focused on trying to retain customers, but I'm not a bank. The return diminishes over time but for an average sized loan at current rates you are still looking at $10-20k per year in interest for the first 15-20 years. Is it work risking $15,000 a year for the sake of not giving the customer a better deal. Banks seem to think so.

$500k 30 years @ 3.5% = $308,280
$500k 2 years @ 3.5%, 28 years @ 4.5% = $399,800

I'd be interested to see what percentage of people stay belong intro rate periods and for how long. I had a 3 year intro rate revert to a shit product and after a small amount of feet stamping was transferred to a better loan. I've also transferred an existing loan because the bank wasn't interested in matching what I could get elsewhere. It's effectively a closed system. Every disgruntled NAB customer goes somewhere, as does every disgruntled CBA or ANZ customer.

 

[Hamingja]

Banks don't care about existing customers. I know this, my broker knows this, my friend who works for a bank and is frustrated by this knows this.

Their focus is new business. Offering 0.5% or 1% under the going rate for two years is nothing when you consider you'll just get the going rate for the remainder of the loan term. Even if you do get customer churn the return on each P&I loan decreases over time anyway. Every new loan gives you the opening balance on which to charge interest.

If it was me I'd be more focused on trying to retain customers, but I'm not a bank. The return diminishes over time but for an average sized loan at current rates you are still looking at $10-20k per year in interest for the first 15-20 years. Is it work risking $15,000 a year for the sake of not giving the customer a better deal. Banks seem to think so.

$500k 30 years @ 3.5% = $308,280
$500k 2 years @ 3.5%, 28 years @ 4.5% = $399,800

I'd be interested to see what percentage of people stay belong intro rate periods and for how long. I had a 3 year intro rate revert to a s**t product and after a small amount of feet stamping was transferred to a better loan. I've also transferred an existing loan because the bank wasn't interested in matching what I could get elsewhere. It's effectively a closed system. Every disgruntled NAB customer goes somewhere, as does every disgruntled CBA or ANZ customer.

I work for a bank and don't really get it either. They spend so much money on advertising to attract customers, pay BDMs to chase business from brokers, pay upfront commission to brokers on new loans & have salaried employees spend the time sifting through applications when only x% of them end up actually being approved. It's a lot of time and money involved in getting new customers, you'd think it would just be cheaper and easier to match rates - or at least provide a counter offer that is not taking the piss - but it is not the way it is done.

I think partially it is done to keep the quality of the bank's loan book up. New customers have to meet the prevailing credit policy, God knows how loose an application approved 10-15 years ago was, and the bank would have no idea on their current credit worthiness so assume the worst and charge them a risk premium on their interest rate.

I think a lot of customers that take intro rates or fixed loans probably end up stuck with their current bank when their circumstances change. Get a loan as a DINK household and then they have a kid and the mother is back to working part time hours or whatever and while they can afford their current repayments ok they can't meet serviceability on loans sensitised at a 5.5% floor rate with a new bank. I'm sure a lot of people get bled like that. Another one is customers age. You can get a 30 year loan when you are 54 but as soon as you turn 55 we will only give you a 12 year loan to take you to the government's retirement age. Then you'd have people who take intro rates or fixed rates on LMI applications that they can't refinance when the honeymoon period ends without paying LMI again. They'd catch a few in the net I guess.

 

[Cruyff14]

Banks don't care about existing customers. I know this, my broker knows this, my friend who works for a bank and is frustrated by this knows this.

Their focus is new business. Offering 0.5% or 1% under the going rate for two years is nothing when you consider you'll just get the going rate for the remainder of the loan term. Even if you do get customer churn the return on each P&I loan decreases over time anyway. Every new loan gives you the opening balance on which to charge interest.

If it was me I'd be more focused on trying to retain customers, but I'm not a bank. The return diminishes over time but for an average sized loan at current rates you are still looking at $10-20k per year in interest for the first 15-20 years. Is it work risking $15,000 a year for the sake of not giving the customer a better deal. Banks seem to think so.

$500k 30 years @ 3.5% = $308,280
$500k 2 years @ 3.5%, 28 years @ 4.5% = $399,800

I'd be interested to see what percentage of people stay belong intro rate periods and for how long. I had a 3 year intro rate revert to a s**t product and after a small amount of feet stamping was transferred to a better loan. I've also transferred an existing loan because the bank wasn't interested in matching what I could get elsewhere. It's effectively a closed system. Every disgruntled NAB customer goes somewhere, as does every disgruntled CBA or ANZ customer.

Yeah, it's a joke.

We refinanced, CBA would do nothing for us despite me having an account with them since birth.

We have since moved our home loan away, and when we get a loan for the house and land, we will be classified as a new customer, and can probably get an interest rate under 3%.

it's absolute madness that existing customers are shown nothing for their loyalty.

 

[raman]

Looking for some general advice on a couple of different fronts.

Our financial situation could best be described as “fortunate”, albeit a little clueless. We currently live in a unit owned by my partner’s family, and the value of that unit has been promised to her as a down payment when she’s ready to buy a house (this goes back to since long before I was on the scene). Conservatively it should fetch $300k, although one with the same floorplan in the same group - with updated kitchen and bathroom - went for $350k about 18 months ago.

We have a combined income of approx $140k, about $70k of our own savings, and no debt. We also have a two year old who desperately needs more space than the unit can provide.

Wanting thoughts on:

- the most efficient way of transferring the equity in the unit from her family to us. Do they sell and give us the cash, or do they sign the property over to us for us to sell? Or something else that minimises capital gains?

- with a deposit of ~$370k how much would be too much in terms of total value? The kinds of houses we’re looking at are in the $800-$900 range. Too ambitious? Should we be aiming lower?

We’re both late 30s so late in the game for our first mortgage - not to mention first kid - and we’d certainly like to have it paid off well before retirement.

 

[Power Raid]

Looking for some general advice on a couple of different fronts.

Our financial situation could best be described as “fortunate”, albeit a little clueless. We currently live in a unit owned by my partner’s family, and the value of that unit has been promised to her as a down payment when she’s ready to buy a house (this goes back to since long before I was on the scene). Conservatively it should fetch $300k, although one with the same floorplan in the same group - with updated kitchen and bathroom - went for $350k about 18 months ago.

We have a combined income of approx $140k, about $70k of our own savings, and no debt. We also have a two year old who desperately needs more space than the unit can provide.

Wanting thoughts on:

- the most efficient way of transferring the equity in the unit from her family to us. Do they sell and give us the cash, or do they sign the property over to us for us to sell? Or something else that minimises capital gains?

- with a deposit of ~$370k how much would be too much in terms of total value? The kinds of houses we’re looking at are in the $800-$900 range. Too ambitious? Should we be aiming lower?

We’re both late 30s so late in the game for our first mortgage - not to mention first kid - and we’d certainly like to have it paid off well before retirement.

any transfer will be subject to stamp duty, so transferring before selling will encounter stamp duty. Then when you buy your next property, you will pay again.

If it is sold under their name, the property is likely to be deemed an investment property and CGT payable.

There isn't really anyway around CGT unless they have CGT losses they could utilise. If they paid $260k and it is sold for $300k, then the CG is 50% of $40k being $20k (assuming it was held for greater than 12 months).

If their personal tax rate is 30%, then $6k tax is payable.

 

[Power Raid]

Looking for some general advice on a couple of different fronts.

Our financial situation could best be described as “fortunate”, albeit a little clueless. We currently live in a unit owned by my partner’s family, and the value of that unit has been promised to her as a down payment when she’s ready to buy a house (this goes back to since long before I was on the scene). Conservatively it should fetch $300k, although one with the same floorplan in the same group - with updated kitchen and bathroom - went for $350k about 18 months ago.

We have a combined income of approx $140k, about $70k of our own savings, and no debt. We also have a two year old who desperately needs more space than the unit can provide.

Wanting thoughts on:

- the most efficient way of transferring the equity in the unit from her family to us. Do they sell and give us the cash, or do they sign the property over to us for us to sell? Or something else that minimises capital gains?

- with a deposit of ~$370k how much would be too much in terms of total value? The kinds of houses we’re looking at are in the $800-$900 range. Too ambitious? Should we be aiming lower?

We’re both late 30s so late in the game for our first mortgage - not to mention first kid - and we’d certainly like to have it paid off well before retirement.

banks will do an asset ratio test and an income test. A girl in our office clears $9k per month and was accepted for a $900k loan with a 20% deposit. Speak to mortgage broker as they will know the ratios better than I and work to get you a good rate. Shop around and don't be frightened to negotiate your fees and interest rate.

So a $500k-600k loan won't be an issue. Remember always borrow more than what you need and have an offset account so you don't pay more interest than you should. Bigger loans are cheaper (lower interest rates, fees waived and you get more attention from banks and brokers). It also helps having a buffer in case you have a second child or something happens.

Essentially if the bank says you can borrow $700k but you only need $500k, apply for a $700k loan and put the $200k into the offset and have all your wages put in there each month. Get rid of your credit cards or reduce them to $2k, as cards count against your borrowing capacity.





If I were you, I would buy the property as an investment property for 12-24 months. Negative gear the F out of it and smash the loan as hard as I could.....but that means staying in the unit for that time. Especially if the difference between a $700k house and a $900k house was a suburb with a top 10 public school.

Good luck!

 

[Scotland]

banks will do an asset ratio test and an income test.

Something good to remember when shopping around. Banks also have their own ways of estimating living expenses. You can say '$1000 a month' but if their minimum is $2500 that's the figure they will use.

I have a broker and if I'm looking at doing anything he'll always tell me not just what rates each bank are offering but how much they are willing to lend me and any other important conditions. The differences can be significant.

I refinanced once and it was simply a case of picking which lender I was happy with. Value had gone up and my income had gone up slightly from the time of application so it was an easy exercise from a bank POV. A few years down the track (i.e. after the 2-3 year period where banks care about your business enough to offer a competitive rate) I went to do the same but the market was in a real trough. No increase in loan amount, decrease in income etc. but a new assessment meant (rough figures) that what was an LVR of about 75 was now possibly over 80, so I could stay and get the best deal (say 3.5%) or go elsewhere and chase 3.2.%, but that might involve putting $20,000 or $30,000 or $40,000 into the loan in order to satisfy that particular bank's valuation and LVR requirement.

So it's something to consider. If you are in a comfortable position with a good wage and plenty of equity you should always be getting a good deal. If you are on the cusp with high LVR and at the limit of your borrowing capacity then your options do diminish somewhat.

 

[PieLebo87]

If your combined income is approx $140,000 pa, with one child, your general living expenses would be approx $3,300 per month, so your borrowing capacity will be around $600,000-$700,000.

If you’ve got contribution of $300,000, whilst factoring in stamp duty/settlement fees, you can buy for around $850,000.

Just rough calculations off the top of my head.

 

[Weiterbot23]

What's the best way to wealth?

Household income - 250k
Mortgage - 730k (house recently valued 1.1mil)
34 years old


Should we try and pay the house off as fast as we can?

Or buy some other properties or shares or some other way

 

[kaiserchief13]

What's the best way to wealth?

Household income - 250k
Mortgage - 730k (house recently valued 1.1mil)
34 years old


Should we try and pay the house off as fast as we can?

Or buy some other properties or shares or some other way

Bitcoin

 

[kaiserchief13]

Bitcoin

Risk reward. Got a lot of income plus youngish so can gamble a bit

Note - not an advisor

 

[Deliverance]

What's the best way to wealth?

Household income - 250k
Mortgage - 730k (house recently valued 1.1mil)
34 years old


Should we try and pay the house off as fast as we can?

Or buy some other properties or shares or some other way

Smash the house debt. Other investments would probably need to earn 8-10% just to break even with the cost of the mortgage..

 

[Weiterbot23]

Smash the house debt. Other investments would probably need to earn 8-10% just to break even with the cost of the mortgage..

Classic 2 comments 2 bits of conflicting advice

One way = driving a Porsche and living large by 60 or struggling and on pension

The other= driving a new Mazda 3, safe and comfortable

I dont Iove my job so the gamble is tempting

 

[Deliverance]

Classic 2 comments 2 bits of conflicting advice

One way = driving a Porsche and living large by 60 or struggling and on pension

The other= driving a new Mazda 3, safe and comfortable

I dont Iove my job so the gamble is tempting

FWIW. I drove the Mazda and now am mortgage free. Threw in my job last year and have the freedom to wait until the right job comes along now.

 

[Weiterbot23]

FWIW. I drove the Mazda and now am mortgage free. Threw in my job last year and have the freedom to wait until the right job comes along now.

Nothing wrong with that

I take pride that I've got the shittest phone out of all my friends, and me and the wife share a 2011 Holden Cruze

The house is the only thing we have spent "too much" on but will be happy in it for life.

I'll happily buy 10k second hand Toyota camrys until I'm debt free

Just dunno if I smash the mortgage in 8-10 years or invest in other properties and finish up debt free in 20-25 years


What's its like mentally when you pay the mortgage off? Must be good

 

[Deliverance]

Nothing wrong with that

I take pride that I've got the shittest phone out of all my friends, and me and the wife share a 2011 Holden Cruze

The house is the only thing we have spent "too much" on but will be happy in it for life.

I'll happily buy 10k second hand Toyota camrys until I'm debt free

Just dunno if I smash the mortgage in 8-10 years or invest in other properties and finish up debt free in 20-25 years


What's its like mentally when you pay the mortgage off? Must be good

Definitely a great feeling.

 

[Cruyff14]

What's the best way to wealth?

Household income - 250k
Mortgage - 730k (house recently valued 1.1mil)
34 years old


Should we try and pay the house off as fast as we can?

Or buy some other properties or shares or some other way

With your incomes vs mortgage, why don't you put extra on your mortgage down?

250k is huge.

 

[Scotland]

Wealth is in the eye of the beholder to some degree.

You could smash down your mortgage and own a home currently worth $1.1m as soon as possible. There is certainly scope to do so based on the raw numbers provided. If you own a million dollar home outright, you are doing pretty comfortably.

You could borrow further and invest in shares, property etc. with the hope of achieving asset wealth down the track. You could also invest in trying to create new income streams (dividends, rent etc) to supplement your income.

Really it's a matter of how comfortable your life is vs what do you want to achieve in 5, 10, 20 years time vs what are you prepared to sacrifice. No one needs a $1m house so you could theoretically sell and pocket about $350k. You could then either but a much cheaper home and have it paid off in no time, or use that money as a single deposit to buy something bigger and better, or to split up and buy a more modest place for you and a couple of investment properties. So instead of paying off a $730k loan on a place worth $1.1m you could be paying off a $6-700k loan on a place worth $7-800k and a couple of cheaper places that could increase in value in years to come. But is it worth it? You can never be truly wealthy without investing, but you can live a very comfortable life without really investing it all. You're a long time dead and personally if I earned $250k I'd rather have a great life now than a whole bunch of stuff that might be worth $10m when I'm 60. It's all about striking a balance.

 

[Guju]

$250K household income, vs $730K mortgage, is excellent income to debt ratio. As others have said, put as much extra as you can into the mortgage, reduce as much interest as possible, and once the mortgage owing is low enough where interest on it is peanuts, then invest more again (but I fear capital growth will be much slower moving forwards, and recession may be around the corner). Also, keep upgrading your prinpical home and increase its value too. That's my take. Easy to say but hard to do.

I am still driving a Subaru liberty 2006 model sedan (sigh).