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  • Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Hi Everyone

    I am with CBA – I have a home loan for PPOR and investment loan.  I am paying 7.11% interest and $350.00 a year in fees (including all fees such as credit card and transaction account).  Do you think that is a good deal?  The investment loan is cross collateralised with the PPOR – something I won’t be doing again.  I have currently got a property under contract and will be looking for a further loan.  My broker is signing me up with CBA presumably at the same rate.  I am borrowing 90% of $475k and being charged $5,700.00 LMI.  Does that sound right?  I am happy with the CBA to date and have no issues with them.  I have heard that it is better to use many different banks, but am not sure why that is.  I plan on developing some property in the next year or so and borrowing plenty more for that so am keen to build a good relationship with CBA so that they will see that I am a top notch guy and lend me more cash so that I can develop these blocks. Any comments gratefully received. Thanks
    Ben

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Ben

    Have to ask why your broker / bank is wanting to cross collateralise the loans together.

    One reason it is easy to process for the Broker / Bank however the biggest loser is you the client especially if you wish to access equity down the track on one of more of the properties. Even if you decide to sell one of the securities in the future to release equity you may find that the Bank request these funds be applied to reduce their existing loan committment which will cause problems.

    There are so many reasons you would not X collateralise your loans however as i mentioned it boils down to the Broker / Banker and how dilligent they are when it comes to the processing or their expertise in this area.

    Depending on your overall lvr the mortgage insurance premium may well be calculated on you overall debt position with the Bank and not just the new loan.

    The interest rate as i have written on so many ocassions is just one consideration when looking at new loan structure flexibility both now and in the future is more important.

    By the way 7.11% is not competitive after all that.

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    Yep i totally agree with Richard,

    The fact it’s a cross loan with LMI is not desirable; i wont go into much detail WHY crossing is not good…but all i can say is LMI is VERY VERY expensive when you cross- as it’s based on the full amount.

    The 7.11% with CBA is not even negotiated down;

    1. 7.11% is based on discount given to client from 1-2 years ago….the NEW discount for ALL client new and old is 6.96-7.06 with CBA wealth package which is what your on….so why arn’t your broker applying for the NEW discount to ALL your loans ( new and existing) which your MORE then entitled to..

    2. If your crossing, YOU/Broker has the ability to drive the rate down further

    3. Loan amount is high enough for a discount.

    So really what is your broker doing? seems like all his/she is doing is lodging the deal – no Structure ( unless you were ok with crossing)+ no negotiated rates, No shop around for cheaper LMI and overall cost etc…

    P.s If your aware your loan is crossed and your fine with that- then it’s ok…it only becomes a problem when you DONT KNOW.

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
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    Same Banks. Better Rates. Served With a Passion.

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

    Hi Ben,

    As has been mentioned by the others, and regardless of how your loan is structured, as stand alone or crossed, while the rate is not everything, on a loan that size from major bank (a good one) you should not be paying a rate that starts with a 7 in the %.

    You could walk into the NAB or ANZ (ironically, probably the CBA too!) as a new customer and get a loan for under 7% as part of a package.

    Get old mate broker to pull out his index and do what he/she should be doing, or do it yourself.

    All the best with the purchase.

    Cheers

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    To further add to Michael's closing comment

    "It is not so much of an issue when you dont know that the loan is crossed more when you dont know the consequences of crossing it in the first place irrespective of whether you know or not".

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Hi Everyone – thanks for your comments.

    In regard to the cross collaterisation, that was done with my blessing – I didn't want to pay LMI for the purchase of the IP and didn't want to lose access to the equity I had available in the PPOR through the redraw.

    The 7.11% rate is on a the PPOR which was obtaining in March 2010.  So I guess that was the going rate then.  Are we now entitled to hit the CBA up for a a further discounted rate now? Is this something they do after the loan is written? Should this be something my broker does on a regular basis?

    My loan for the PPOR is $380K, the loan for the first IP is $540 and the new loan will be for around $420 depending on what LVR I opt for.  Should I be getting a lower rate than most?

    Myself and my partner are both employed in long term professional jobs with good incomes.

    Thanks for your comments.

    Ben

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Ben

    Not Cross collateralising your loans would have had no bearing in the fact when it came to paying LMI for the purchase of the IP or indeed would not have limited your access to the equity you had available in the PPOR through the redraw.

    The figures are exactly the flexibility going forward is the difference.

    YES you should be getting a lower rate than you are on and YES your broker should have negotiated this for you.

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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

    Hi Ben

    If total borrowing is greater than $750k and LVR is sub 80% then hit them up for a variable rate of at least 6.8% sighting ANZ's current breakfree offer.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

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

    FYI – your broker can send the request into CBA pricing for the rate discount mentioned above.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Exactly Jamie and evern more you can do it with Anz on an uncrossed basis.

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404
    Shape wrote:
    If your aware your loan is crossed and your fine with that- then it's ok…it only becomes a problem when you DONT KNOW. Regards Michael

    I wouldn't say it "ONLY" becomes a problem if you don't know. There can be MANY problems EVEN if you know it's crossed.

     Eg one property goes down in value. That then affects both properties.

    I just renegotiated my loans with CBA. They bought out the paperwork with all properties listed on all the loans. Rep assured me they weren't crossed. LOL. Ripped them up. Start again. Finally all stand alone.

    With your new loan you can negotiate 1% discount = 6.81% ATM.

    With reference to using different banks. Most people recommend capping your loans with one bank at 1-1.2mill.
    This "apparently" keeps you under the radar.
    So once you hit that figure go to another bank. I also find it keeps them on their toes a bit. I'm mainly with 2 banks. And they ring me and ask do I want to bring my money over from the other. "can I do a deal for you". haha

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099
    benofbrisbane wrote:
    Hi Everyone – thanks for your comments.

    In regard to the cross collaterisation, that was done with my blessing – I didn't want to pay LMI for the purchase of the IP and didn't want to lose access to the equity I had available in the PPOR through the redraw.

    The 7.11% rate is on a the PPOR which was obtaining in March 2010.  So I guess that was the going rate then.  Are we now entitled to hit the CBA up for a a further discounted rate now? Is this something they do after the loan is written? Should this be something my broker does on a regular basis?

    My loan for the PPOR is $380K, the loan for the first IP is $540 and the new loan will be for around $420 depending on what LVR I opt for.  Should I be getting a lower rate than most?

    Myself and my partner are both employed in long term professional jobs with good incomes.

    Thanks for your comments.

    Ben

    If you get away with LMI “crossed”…it means you could have gotten the same loan uncrossed with no LMI as well…
    Crossing doesn’t mean you “Gain” any extra equity….it just makes it easier for the BANK.

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    i am not sure I understand the cross thing.  The issue was that I had $100K available by way of redraw in the PPOR.  I didn't want to put up any cash for the IP, so I borrowed 100% plus costs.  To borrow 100% plus costs on a stand alone basis I would have had to pay LMI.  By providing my PPOR as security for borrowing for the IP I was able to avoid paying LMI as the amount of the amount of the loans was less than 80% LVR overall.  I don't see there is any other way I could have done it.  If someone can explain it to me (perhaps they have and I just don't get it!!) than that would be great.

    Thanks

    Ben

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Ben

    Look i hate to say but your Broker should have explained this all to you.

    To achieve the same end result without crossing the loans all your Broker would have done would be:

    1) Set up standalone loan of 80% of the new IP purchase price secured against the IP solely.
    2) Set up a separate sub loan (Do NOT touch the redraw) for 20% of the IP purchase price and sufficient to cover your acqusition costs secured against your PPOR.

    Both loans separate and secured solely on the individual property itself.

    End result NO LMI and only an amount of 20% + acqusition costs secured against your PPOR.

    End of Year 1 Revalue IP and draw upto 80% of the increased valuation.
    Pay down the equivalent amount secured against your PPOR by way of the equity loan.

    Repeat steps for next dozen IP's.

    Now of course you may have a problem…… but as i mentioned in my opening response post.

    Only reason your Broker would not have done it this way is

    1) Laziness and convenience for him / her.
    2) Lack of knowledge or understanding of the problems it would cause down the track.

    Yours in Finance

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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

    Ben of Brisbane – maybe it's best to get  Richard of Brisbane (above) to sort this out for you. At least you won't have to worry about the structure being buggered up.

    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 benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    thanks Richard – the only problem being that I do not have a lot of equity available in the PPOR.  The redraw takes the PPOR loan up to 80%.  So to borrow more against the PPOR I would have had to pay LMI wouldn't I?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Ben there is no difference in the LMI (other than crossing securities can work out more expensive in regards to the premium) if you cross your loans or structure them correctly.

    Without the exact numbers it is difficult to set out to you the actual calculation for you but there is no difference as i say.

    Cheers

    Yours in Finance 

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Thanks for your comments Richard – and everyone else too.  I guess my position was that I really didn't have the equity in my PPOR (that I wanted to touch anyway) to allow me to take out the second loan on it – though I see what you are saying now in relation to thinking a little creatively.  I am sort of pretty entrenched with my current broker for various reasons so cannot go changing at the moment.  Though Richard I will certainly keep you in mind!!

    One positive though, is that I emailed my broker regarding my rate and he has told me that he has already put in a request for CBA for the interest rate to come down.  So fingers crossed!

    Thanks

    Ben

    Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Hi All –

    just an update – my broker hit up the CBA for a further reduction and they have given us 0.95% off the standard variable, which takes us to 6.61%, which seems good.  This is 0.25% reduction from where we were and with the RBA cut we are now 0.50% down from where we were last Monday.

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470

    Hi Ben- you should be able to get another 0.05% off at least.

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