Forums / Property Investing / Help Needed! / Interest only loans with offset

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  • Profile photo of propertyinfopropertyinfo
    Member
    @propertyinfo
    Join Date: 2011
    Post Count: 6

    Just wondering if anyone could advise what are some of the better interest only loans with offset account that are available at the moment.  Also, I was told interest only accounts are typically only 5 year terms, is this true? If so, what happens after the 5 years?

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

    Hi propertyinfo

    Depends on the deal – in general, the lower the LVR the better the rate. After 5 years you can normally refinance to another interest only term – some lenders, such as Adelaide Bank, offer 10 year IO loan terms.

    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 Blank FrankBlank Frank
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    @blank-frank
    Join Date: 2011
    Post Count: 22
    Jamie M wrote:
    Hi propertyinfo

    Depends on the deal – in general, the lower the LVR the better the rate. After 5 years you can normally refinance to another interest only term – some lenders, such as Adelaide Bank, offer 10 year IO loan terms.

    Cheers

    Jamie

    Jamie, you seem to be saying that banks can be bargained down or somehow negotiated with. I haven’t found that, but haven’t tested the field.
    The published rates is what I am offered.

    Of they have more competitive rates, or are negotiable why keep it a secret?

    I am going in with a 20% deposit….is that just average or am I an ‘attractive investor’. [please do not ask to see photo :-) ]

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

    Hi Frank

    Not keeping anything secret it was just a general comment. For instance, Homeside will do 6.9% on their pro pack, the homeplus variable for deals that are sub 75% LVR and loans above $250k. Choicelend will do a little better, 6.88% but their variable product doesn’t come with an offset and the LVR will need to be less than 65%. These aren’t intro rates.

    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 v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871

    Hi property info,

    This can definitely be a good way to set up a loan – ideal for an investment property.
    I think the ANZ is the only one of the big 4 to offer a 10 year I/O term – with 5 years being the usual.
    As far as rates go, you may find you will pay slightly higher rates for an interest only loan (or that offset is not available) unless you are borrowing over $250k, or unless you use a 'premium' or 'standard variable rate' loan, rather than a basic type, depending on the lender.
    Rate is more likely to be affected by borrowing amount rather than LVR, but with a 20% deposit you will find yourself 'welcome' with most good lenders. NAB offer a good product with their choice package that would suit you. Beware that some non banks and credit unions will not offer true offset accounts, or will not offer with interest only loans, but only P&I.
    General info only, but hope it helps.

    Cheers.

    Profile photo of jacqui_03jacqui_03
    Member
    @jacqui_03
    Join Date: 2010
    Post Count: 142

    I know CBA offer a 10 year Interest Only term, I have always been a little worried about going in that long though as I heard it can have a negative impact when the Banks use their servicability calculators as they work out a much higher P&I payment after the IO?? I know with CBA if you are switching back to any term above 5 years IO it will have to be referred to credit for assessment.

    Can you clarify this for me Jamie?

    Cheers,

    Jac

    Profile photo of jasonfonsecajasonfonseca
    Member
    @jasonfonseca
    Join Date: 2010
    Post Count: 44

    my 2 cents – you can negotiate with the banks. If not on interest rates, then at the very least on establishment fees etc. If you go with a mortgage broker, it costs you nothing out of your own pocket, but the banks need to pay the broker. There are a lot of brokers on the forums who i am sure can get you a better deal with the big 4 banks than the advertised rate. I guess when you talk to a broker they’ll likely give you the best deal they have to offer, but with the banks, the only deals on offer are the ones from that bank.

    Good luck!

    Profile photo of 4jojo4jojo
    Participant
    @4jojo
    Join Date: 2009
    Post Count: 18

    Wondering-  Do mortgage brokers get better rates etc?  Yes, I know they don't charge us a fee for their service (as they get their money from the banks – over the term of the loan).  But I'm wondering whether I am better off going directly to a variety of different banks myself (yes, I'm aware it can be time consuming but so can dealing with a mortgage broker).  In the end will I end up getting the same result?

    I would be happy to use a mortgage broker to do the initial work and pay he/her a fee for this service but I'm not keen on the long term fees they get paid, even if it's paid by the bank.

    What do you think?

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544
    4jojo wrote:
    Wondering- 

    1. Do mortgage brokers get better rates etc?

    2. But I'm wondering whether I am better off going directly to a variety of different banks myself (yes, I'm aware it can be time consuming but so can dealing with a mortgage broker).  In the end will I end up getting the same result?

    3. I would be happy to use a mortgage broker to do the initial work and pay he/her a fee for this service but I'm not keen on the long term fees they get paid, even if it's paid by the bank.

    4. What do you think?

    My thoughts;

    1. Maybe/maybe not depending upon the individual broker – property investing is more than just 'interest rates' as there are far more important things to worry about. You also need to consider such issues as capacity to maximise borrowing but even more important loan structuring. To me these last two items carry much more weight than 'interest rates'

    2. I would be very surprised if you only get the 'same result'. Maybe from an interest rate perspective but as indicated above in 1 – interest rates are almost secondary in consideration to other aspects of lending money.

    3. Yep brokers do get trailers. Not sure why this would be a concern as brokers are not allowed to people into unsuitable loans and if ever questioned by authorities need to justify why lender X and package Y were chosen. I am happy for my broker to earn his trailers – believe me he earns them.

    4. A bigger perspective is required.  

    Profile photo of traceyimbtraceyimb
    Participant
    @traceyimb
    Join Date: 2003
    Post Count: 82

    Hi Property Info,

    Westpac also has 10 yrs Interest only with an offset account.

    Brokers can negotiate with banks for you and as we are often doing this can advise you on what likely interest rate discount you may receive.  The LVR, loan amount can impact the amount of the discount and it depends on the market.

    The banks are pricing, offering cashback for refinances and waiving fees right now.  We are in the middle of a bank war so take advantage while you can.

    Kind Regards,
    Tracey

    Profile photo of propertyinfopropertyinfo
    Member
    @propertyinfo
    Join Date: 2011
    Post Count: 6

    Thanks for the info all.

    Although we are in a bank war so to speak, i was surprised when I went to apply for the bankwest premium they did not want to waive the appl fess, even though it was only one day after the promotion ended.  Are bankwest really that content not to have business?  I thought they would be ok with it (it's a $700 app fee), but instead i'm now looking at other options.  The Aussie broker i was dealing with wasn't able to assist either.  Are these things really not negotiable???

    propertyinfo

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