My Brother was signed up for a low doc loan with a broker and a smaller bank in SA.
During the process of organising finance the mortgage broker said yeah no problem you can get finance.
So away he went and bought a place subject to finance.
I spoke to my broker who is attached to my solicitor and he suggested RAMS. This broker said no Bank XXXXX is better and was not interested in RAMS.
One of the conditions was that he wanted to refinance with a big bank. Anyway it took like 6 wks to get finance arranged and only a few days before settlement it turns out there is a $1000 penalty if you refinance in less than 3 yrs.
I cannot recall if he knew or not about the penalty.
Irregardless of whether he knew or not morally this broker did the wrong thing by signing him up with that other bank and not knowing the other low doc products out there.
Should he pursue that broker for the $1000 penalty or insist to the bank that the broker mislead us. He did make it clear to the broker that he wanted to refinance the low doc loan in 1-2 yrs time.
Your comments appreciated.
unfortunately most low docs have high exit fees. Did he ask the broker what the fees were? Also many low docs now revert to standard interesr rates after a few years.
If he thinks $1000 is high, he is lucky he didn’t go with RAMS then!!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry
Are you saying, loc doc exit fees on all products are expensive?
Do they build in high exit costs so people stay paying a higher interest rate for longer.
We are going to see my broker attached to my solicitor this week.
Hi Yack
Yes, Just off the top of my head, nearly all low docs have high exit fees – except maybe ANZ (60% LVR tho).
The exit fees on RAMS would have been approx 1.5% of the original loan amount in first 2 years plus $295. eg on a $200,000 loan this would be $3295.
It is best to ask up the broker up front what the fees will be. generally the low the interest rate the higher the exit fees – its a trade off.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yack, definitely agree with Terry re the ‘break’ costs.
We’ve just gone/going with RAMS (cos they’re about the only ones that would touch us) for a $640K loan, which my broker told me will have fees in the order of what Terry said to get out of it in the next two years!!
Cheers
MelHi Guys,
I too am on a lo doc loan with exit fees.
Does anyone know if this applies if you want to increase your borrowings with the same lender?
Sue [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
some banks say they dont make money unless the borrower is in the loan for 2yrs and they the banks have a sliding scale of exit fees always ask what the exit fee is before signing up
also they have a clause where if you sell befor 12 months is up the broker has to repay his commission to the bank…thats called a claw back fee…doesn’t leave much to the imagination does it. Maurn [angel]I’d suggest watch this space as lenders increase penalties for early exits – ave cost of raw cost of loan set up (as I’ve heard) is in vicinity of $2500 – people who are ‘in and out’ will wear the cost more and more so I feel.
cheers
brahms
If you don’t ask, the answer is no!!
yack,
Frankly a $1,000 penalty isn’t that bad. There are loans with much higher penalties.
I’d wear that level of penalty comfortably.
ALWAYS when taking out loans, you don’t rely on the broker’s word – you read all the documents yourself. You are the one with the obligation & you are the one with the responsibility.
Cheers,
Aceyducey
Yes $1000 is actually not too bad.
Although your broker should always make you aware of these costs, even if it is in the fine print. An ethical broker should make the effort, especially considering your brother even mentioned a forseeable re-finance.
Liz Wilson
The thing I find frustrating is that these break fees are often “hidden” in garbled wording or unclear statements. Some loans (not fixed rate necessarily) also charge you an early repayment fee if you pay a slab of the principal off.
My favourite is Latrobe Home Loans, if you want seriously nasty break costs that are not easy to spot.
You have an early repayment fee, which is charged whether you repay the entire loan or make a principal reduction – that one’s equal to 3 months interest, with a minimum of $300. Not much point paying off $1000, is there?
Then you have a refinancing call protection fee, which occurs if the loan is refinanced within 5 years – that one’s 6 months interest on 80% of the remaining loan balance.
So, to refinance out of a loan of say $150,000.
You have the early repayment fee of around $2750, plus the call protection fee of around $4500.
Suddenly $1000 doesn’t look too bad at all…..Keep smiling
Felicity
Hi Rob
The fees and charges aren’t “hidden”, they’re just phrased in such cute terms that unless you actually sit down with a calculator and work them out, you really don’t understand how much they’re going to cost you.
I must admit that first time around I also didn’t realise that BOTH early payment fees would apply either, it took 2 readings to get that one worked out.
Oh, and if you can find many other lenders doing 80% LVR lo doc with no mortgage insurance at 7.34%, I’d love to hear about them!!! St George is the only other one I’ve found (and they have LMI, they just don’t use PMI or GE).Keep smiling
FelicityHi Felicity
76% is doable with no MI – that is the loan is not MI’d at all – also, you do realise that you pay the MI on st g low doc above 60% – don’t you?
80% low doc are ‘all’ MI’d – would you consider a low doc non conforming – no MI, higher % of course.cheers
brahms
If you don’t ask, the answer is no!!
Felicity
Suncorp low doc is not mortgage insured – up to 80% LVR, but they will not do companies or trusts.
ING and Adelaide Bank will also do low doc with no mortgage insurance at all if under 76% LVR.
The one ROB is talking about is with Macquarie, and I agree it is one of the best, but all of their loans are mortgage insured (they pay the premium), which means you will have the LMI restrictions applying.Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The Macquari Bank Saver Express is a good Low Doc Product
7.30% (CP Rate 7.35%) reverts to 6.50% 80% LVRSuncorps Ready Access Low Doc package at 6.97% (CP Rate 7.08%) 80% LVR is ok with a strong application,
$250K Minimum assets required, and they don’t like doing addbacks,Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Hmmm I had replied already but it seems to have disappeared into cyberspace!
Yes Brahms, I am well aware St George charge LMI, I just paid the premium! But they self insure, which avoids the problem I have with being maxed out with GE and PMI.
I plan to do a few more loans through St George and avoid La Trobe again for a while.
I have looked at non conforming lenders, but their break costs aren’t particularly friendly either, and at least Latrobe’s rate is 7.34%, much better than the non conforming lenders.
JVs and 76% here I come!Keep smiling
FelicityFelicity, thats a handy differentiation you’ve made – yes it can be a definate prob when GE and PMI are ‘maxed’ or close to it – you know the drill pretty well. There are options that remain, at approx 70 – 75% self cert.
cheers
brahms
If you don’t ask, the answer is no!!
Rob,
I stated the comparison rates on the Initial Rate for both lenders, and quoted the step down rate on the Macquarie product,
As I said, The Macquarie Bank Saver Express is a good Low Doc Product,Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Hi Rob
Unfortunately my accountant did his job too well last year – nice refund, lousy returns for full doc loans….Keep smiling
FelicityHi Rob
Believe me, I know there’s always a way! Otherwise I would have given up a long time ago on my property journey, and wouldn’t be where I am today.
Sometimes it just costs a little more to move ahead, that’s all.
When you add together lousy tax returns, FT investor and FT student, it’s not a good look for full financial loans!!!
That’s okay, I’m still moving ahead and finding different paths to follow.Keep smiling
Felicity
You must be logged in to reply to this topic. If you don't have an account, you can register here.
