All Topics / Finance / Should I pay $3300 LOC App fee for 0.35% discount?

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  • Profile photo of abbruzziabbruzzi
    Participant
    @abbruzzi
    Join Date: 2006
    Post Count: 19

    Hi there,

    I am about to get approval for a LOC from RateBusters.

    They have the same LOC loan in two versions.

    Rate Buster is 6.67% but has 0.66% application fee (max $3300) $220 valuation fee.

    Fee Buster is 7.02% and is $0 application and $0 valuation fee.

    I figure that if I get Ratebuster LOC it will cost me $3520 set up fee and trusting that Ratebusters keep that Interest rate at such a low rate in comparision to Feebuster , it will take about 3-4 years to recover the application fee for a 550k loan amount and then be sitting pretty on a very low Interest rate for the rest of time.

    I calculate for a 200k IP the yearly cashflow could go from cf+473 to cf+915.

    Please help and tell me if I am mistaken or it is in fact worth the massive outlay

    Cheers
    Abbruzzi[blink]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    When you consider the average loan last around 4.5 years i think they are covered.

    What guarantee are they providing to keep the rate at that margin and for how long.

    Dependant on the size of the loan you would probably get upto 0.9% discount with a Pro Pack with the right lender and have minimal set up fee.

    Cheers

    Richard Taylor
    Residential & Commercial Finance Broker.
    Licensed Financial Planner.
    Ph: 07 3720 1888
    [email protected]

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Peter31366Peter31366
    Member
    @peter31366
    Join Date: 2007
    Post Count: 2

    It is interesting to note that one of the concerns were Ratebusters "guarantee" to keep a low rate

    I have been looking into them and found that they only passed on .20% of the .25% RBA interest rate increase in 11/06 and then they reduced the rate voluntarily in by 0.02% in Feb 07 which no one else did and there was no expectation of a reduction !

    So the savings fom the low rate just keep getting better – they seem to be in it for the long haul compared to a few others who "swoop and then disappear "

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Peter

    You are right with an early repayment fee of upto 1.2% of the loan amount if more than 50% of your loan is repaid within 3 years and 0.6% for 5 years you are really in for the long haul as you could not afford to refinance away.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of lealea
    Member
    @lea
    Join Date: 2004
    Post Count: 26

    RateBusters is owned by the same owners as Assured Home Loans – based in Adelaide's north-western suburbs.

    They count on the fact that most people want to refinance (or sell) before the usual 4 years anyway, so you've not covered the exorbitant cost of the set up AND you cop a penalty for paying it out before their 5 years.

    Go and barter/negotiate between a couple of bigger banks. You'll get decent discounts without the ridiculous set up and exit fees.

    Just my two cents

    Lea

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