All Topics / Finance / Interest Only – Arrears or Advance?

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  • Profile photo of mrtendermrtender
    Member
    @mrtender
    Join Date: 2008
    Post Count: 16

    I have a question regarding Interest only loans.

    I intend to borrow $320,000 for a residential IP.

    I bank with the NAB, and I can get approval there pretty easily… I am also going to negotiate hard for discount off their advertised rate (GIMME THE LOAN AND A BETTER RATE OR I'LL TAKE MY WHOLE FRANCHISE GROUP AWAY FROM YOUR BANK!!!!! ….. oh the power!!!! Oh the joy of watching the pathetic scrawny little Bank Manager squirm …. haha)        ;-) 

    The NAB's advertised rates are:

    Interest Only in Advance (NAB Tailored Home Loan)    8.19% pa

    Interest Only in Arrears (NAB Tailored Home Loan & NAB Portfolio Facility fixed rate sub accounts)   8.39% pa

    What is the difference? What is better?

    Profile photo of JOnROBJOnROB
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    @jonrob
    Join Date: 2008
    Post Count: 3

    Hi…
    As a NAB employee, I suggest you speak to your personal banker in regards to which is a better option for you!
    They dont really care about your pulling power with you taking it somewhere else, cause really who cares when you already make a $4 billion dollar profit.
    I'm sorry, I'm not a smart a&% but I can say I'm proud to work at NAB as they have given me plenty of opportunities that many other companies woudn't have.
    The portfolio facility in my personal opinion is the best option as you you get better discounts.
    Cheers

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Interest in advance is when you pay the interest upfront. It is usually done in June with 1 year's interest being paid upfront. This helps you claim a larger tax deduction this fin year – but means less of a deduction the next year so be careful.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of mrtendermrtender
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    @mrtender
    Join Date: 2008
    Post Count: 16

    Sorry to slam the bank that you work for jonrob. I do have a tew frustrations with the NAB. The transaction fees are horrendous, and after being with the NAB for 15 years i am sick of these fees…. although the personal service has always been excellent… the NAB has never bounced a cheque on me even when I have been overdrawn…. they have always honoured it… but charged me plenty for it.

    Thanks for the info on the Arrears / advance thing and the recommendation of the portfolio option

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

    Good luck with the NAB in negotiating a better rate and reduced fees.

    Whilst i do a fair amount of business with the Bank (for a variety of reasons) I have found that they will not negotiate and as Jonrob has mentioned it is take it or leave it.

    I have a portfolio with the Bank just under $8 Million of lending and whilst I am happy with what they have done that had to go to Specialised Lending to get the rate and fees discounted.

    For your average client they do not bargain.

    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 JOnROBJOnROB
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    @jonrob
    Join Date: 2008
    Post Count: 3

    Hey who doesnt like fee's, hell I dont even get a fee free account!!
    But if you use your accounts wisely and monitor them, you shouldn't even get fees!~ Banking will be better!
    Hey you are going to get fee's wherever you go!
    But always discuss with your financial planner/accountant and personal banker about which option is better for you though!
    Happy Banking! and Investing……………..

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

    Hey you are going to get fee's wherever you go!

    Not quiet true but i do appreciate your allegance to your employer.

    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 TracyDTracyD
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    @tracyd
    Join Date: 2005
    Post Count: 85

    Hello Mrtender,
    Have you looked around for lending? just because you have business with one bank, doesnt mean you have to stay with them.:)
    I Dont pay any fees whatsoever with my bank.

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

    Which Bank is that Tracy?

    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 TracyDTracyD
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    @tracyd
    Join Date: 2005
    Post Count: 85

    ANZ, sorry I do pay $300 once a year for my morgage package, but thats all, no other ongoing fees whatsoever. Im pretty sure the NAB and other banks have monthly account keeping fees etc…which i think is amazing considering the amount of $$ the banks make on the interest we pay!

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

    Hi Tracy

    Ok that makes sense then.

    A pro package does alleviate a lot of the standard fees although i guess you are paying an Anual amount which with Anz is $340 per annum and you still incur a monthly fee on the Money Saver and fixed rate products.

    The Pro pack also does not cover the Lodoc 80 product or any loan in a Company or Trust structure which are charged as normal.

    Like everything it is horses for courses. 

    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 mrtendermrtender
    Member
    @mrtender
    Join Date: 2008
    Post Count: 16

    Hi Tracy

    My beef with the NAB's fees is really not to do with property or mortgages…. it is more to do with my business, which happens to be a very high transaction business….  $15mil turnover with an average sale of $80   =  a lot of individual business transactions = a lot of fees.

    $15 mil  turnover might give you the impression that I am loaded with $$$$…. but the reality different. I  have a small franchise group, of which I own 1 store and have 10 Franchisees. The industry is high turnover low margin… transaction fees across my group for the 12 months to Sept 2007 = $104863!!!!!!  This is on top of the finance I have pushed to the NAB to finance some equipment purchaces :(

    To be honest i don't even know what interest I am paying on my personal home loan, nor could i tell you what other charges are in there. But now I have a reasonable amount of equity in my house, and my eyes have been opened to the opportunities that intelligent property investment can create, I'm going to work on my bank manager and demand the deal that I deserve, and start making some bold but safe investments.

    Thanks Terryw for the info on Arrears / Advance Interest only.

    I'll let you know how I go on the take it or leave it negotiations :)

    Brent

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Brent

    That is a lot of fees! Surely there is a better bank out there with no fees?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of Tysonboss1Tysonboss1
    Participant
    @tysonboss1
    Join Date: 2007
    Post Count: 306
    mrtender wrote:
    Hi Tracy

    My beef with the NAB's fees is really not to do with property or mortgages…. it is more to do with my business, which happens to be a very high transaction business….  $15mil turnover with an average sale of $80   =  a lot of individual business transactions = a lot of fees.

    $15 mil  turnover might give you the impression that I am loaded with $$$$…. but the reality different. I  have a small franchise group, of which I own 1 store and have 10 Franchisees. The industry is high turnover low margin… transaction fees across my group for the 12 months to Sept 2007 = $104863!!!!!!  This is on top of the finance I have pushed to the NAB to finance some equipment purchaces :(

    To be honest i don't even know what interest I am paying on my personal home loan, nor could i tell you what other charges are in there. But now I have a reasonable amount of equity in my house, and my eyes have been opened to the opportunities that intelligent property investment can create, I'm going to work on my bank manager and demand the deal that I deserve, and start making some bold but safe investments.

    Thanks Terryw for the info on Arrears / Advance Interest only.

    I'll let you know how I go on the take it or leave it negotiations :)

    Brent

    Surely that is including efpos transaction fees,….. If you are paying more than 0.74% on credit card your paying tomuch

    Profile photo of McNormanMcNorman
    Participant
    @mcnorman
    Join Date: 2008
    Post Count: 20

    NAB choice package, $370/yr,

    no fees + cheaper rates

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

    McNorman

    Yes agreed but not as competitive as most other majors.

    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 Tysonboss1Tysonboss1
    Participant
    @tysonboss1
    Join Date: 2007
    Post Count: 306
    McNorman wrote:

    NAB choice package, $370/yr,

    no fees + cheaper rates

    the commonwealth bank wealth package is good,

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871

    Actually mcNorman is on the money…this package IS more 'competitive' than most if not all of the other majors, althought again it is horses for courses. If you use a credit card with rewards program, I think NAB may be the only lender that waives this fee as part of their 'choice package' (All lenders have a catchy name for their annual fee package. main diff between NAB and ANZ for example is that inclusion, if you and your partner/spouse have a gold credit card with rewards program it costs you ZIp in annual fees, ANZ used to slug for the rewards program still when i used this pack. Also, you can include the GOLD account with NAB, which includes no non bank atm fees, no overseas atm charge usig your savings access, and no currency conversion fees. That's why I chose it after looking around heaps. Whatever lender you have a 'package' with I say simply, use it to your advantage.! Cheers :-)

    Profile photo of mrtendermrtender
    Member
    @mrtender
    Join Date: 2008
    Post Count: 16

    Well… Humble pie is what i am eating….

    You were right jonrob and qlds007….I got an answer of  … " Sorry mate there is no room to move"…

    The IO loan is at rate of 8.56% with no fees…. which is what they advertise

    I am excited about this IP though…. it is a ripper

    Profile photo of JaleesaJaleesa
    Member
    @jaleesa
    Join Date: 2008
    Post Count: 2

    CBA $300 wealth package (I'm not promoting them b/c right at this moment I'm not happy with my structure) however, for $300
    I have no fees on any accounts or any of my 4 mortgages and I get a free credit card (which of course I don't use).  I think that's pretty darn good.  Aah yes and I get .7% off standard or 0.15% off fixed. 

    Just for those that don't like to pay upfront a reminder its alot easier to claim $300 on your tax if you have 1 IP than to run through all your accounts trying to claim all your fees for the year.

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