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  • Profile photo of Blade328Blade328
    Participant
    @blade328
    Join Date: 2012
    Post Count: 9

    Hi all. Just wondering the pros and cons of splitting a loan when looking at buying an investment property in the near future (next 6 months). I am currently with ME Bank my variable is 5.43% but dropping to 5.18% i believe after the interest rate cut with an offset account set up, they are also offering a 3 year fixed rate at 4.79%. Any thoughts/information be much appreciated. Thankyou for your time

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    By splitting a loan is a type of strategy for people that want to manage their risk (by fixing a portion of the loan) and take advantage of the benefits of an offset (by keeping a portion variable).  

    Now some lenders do offer an offset on fixed loans but ultimately you are paying a premium on the rate. I have used this strategy within my own portfolio. 

    Re the rates – they are not very competitive rates from ME Bank. You can definitely do much better – e.g AMP is offering 4.69% on 2 year fixed rates and many others are both competitive and offering cashbacks for refinances. Choose wisely before locking in a rate and lender.

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    If you're considering fixing than leaving a portion variable is a good option. 

    Is this property a PPOR or an IP?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Blade328Blade328
    Participant
    @blade328
    Join Date: 2012
    Post Count: 9

    Thank you Shahin and Jaimie M, the property is my PPOR

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    OK – than a separate variable split is definitely a good idea. That way, you get to utilise flexible features such as an offset. 

    You might find cheaper options than ME but you need to weigh up ALL of the costs associated with an external refinance. They include state govt. fees, lender discharge fees and incoming lender application fees where applicable. If there's LMI involved than it's rarely a good idea to switch lenders.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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