4.49% - 3 year fixed rate but with a smaller lender?

P

pipsal

Have been tossing up whether to fix or not over the past year or so. At this stage I have no plans to sell the property (ever), but you just never know I guess so I still haven't committed to fixed because of potential break out penalties. The fixed rates seem to have levelled out now though, and I'm no expert but I don't think they will drop much more.

Currently I'm on variable of 5.3% with Commonwealth. Have found a 3 year fixed rate of 4.49% with Teachers Mutual Bank though...at the end of the fixed it reverts to their variable account which is currently 5.73% - not discounted like my current variable, but there is nothing to say you have to stay with them or on that loan type after the 3 years is up, because it says no penalty for early payout (wonder if that applies to the fixed term...that'd be nice in case I did need to sell!).

I'm seriously thinking this one is worth locking in, it will make the property pretty much CF neutral after tax return, and I am trying to work towards my second now. But I have never heard of Teachers Mutual Bank before...they used to be Teachers Credit Union. I am eligible to join, I looked at the criteria, but are there any negatives/risks anyone has come across when using such a small lender? Apart from the fact that they would have absolutely no branches in Qld, and only about 5 in Australia?
 
Interest rate is about 5th down the list on order of importance. How does moving to a new lender help you attain your goals? What policies do they have that match/benefit your circumstances? How will this loan be viewed by other lenders when its time for the next one?

If your goal is 10 properties or more, you really need to plot a path with your broker on which lenders you're going to use for which property so that you dont hit a wall.
 
pipsal said:
Have been tossing up whether to fix or not over the past year or so. At this stage I have no plans to sell the property (ever), but you just never know I guess so I still haven't committed to fixed because of potential break out penalties. The fixed rates seem to have levelled out now though, and I'm no expert but I don't think they will drop much more.

Currently I'm on variable of 5.3% with Commonwealth. Have found a 3 year fixed rate of 4.49% with Teachers Mutual Bank though...at the end of the fixed it reverts to their variable account which is currently 5.73% - not discounted like my current variable, but there is nothing to say you have to stay with them or on that loan type after the 3 years is up, because it says no penalty for early payout (wonder if that applies to the fixed term...that'd be nice in case I did need to sell!).

I'm seriously thinking this one is worth locking in, it will make the property pretty much CF neutral after tax return, and I am trying to work towards my second now. But I have never heard of Teachers Mutual Bank before...they used to be Teachers Credit Union. I am eligible to join, I looked at the criteria, but are there any negatives/risks anyone has come across when using such a small lender? Apart from the fact that they would have absolutely no branches in Qld, and only about 5 in Australia?
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That is a great fixed rate and it's unlikely that the variable rates are going to go lower than 4.49%, so there isn't much chance of you regretting fixing from a rate perspective, so it really just depends on your situation and if you think there is any chance of you wanting/needing to sell.

No penalty for early payout sounds too good to be true (or what is the benefit for the bank offering a fixed rate?) There might be an allowance for additional repayments without penalty though.

It's worth checking what the discharge/exit fees would be, as it sounds like you will want to either refinance or get a new fixed period after the 3 years to avoid reverting to a high variable rate.

If you're happy not having branches and doing everything online, you should be fine.
 
Thanks for your reply...its left me with more questions though!! I am obviously showing how much of a novice I am at this... but I am not sure how the loan will be viewed by other lenders - I guess in my experience they look at what my loan is and what my repayment committments are and tell me what else I can borrow? Plus LVR for equity if needed. Is there something else I need to consider here?

And the policies you are referring to - do you mean early repayment, fees, 95%LVR, PI/IO etc? They will do 95% LVR loans and IO, and if I got a second loan before July I would probably look at using same lender if possible and fixing it at 4.49% too.

Whilst more than 2 properties might be an ultimate goal (10 in about 30 years time maybe?!!), I'm just trying to get from 1 to 2 for the foreseeable future. My thoughts are that at this stage peg down the total amount and the regular repayments of the loan on the first property so that I am in a better position with regards to equity and/or cash for deposits. Having that loan be fairly self-sufficient without me having to put much of my income in will help me to service another loan for a property that will most likely not be CF neutral/+. Locking it in for a few years will keep that at a standard rate. I have heard that once you have the first couple or properties it can become easier/quicker to purchase the following properties, but I am slow starting - 5 years with 1 and still not much LVR in it because I bought at peak, but trying to look at a second - do I still need to sit with a mortgage broker and plot a path if my third purchase might realistically be 5 years or more away?
 
Chris B said:
That is a great fixed rate and it's unlikely that the variable rates are going to go lower than 4.49%, so there isn't much chance of you regretting fixing from a rate perspective, so it really just depends on your situation and if you think there is any chance of you wanting/needing to sell.

No penalty for early payout sounds too good to be true (or what is the benefit for the bank offering a fixed rate?) There might be an allowance for additional repayments without penalty though.

It's worth checking what the discharge/exit fees would be, as it sounds like you will want to either refinance or get a new fixed period after the 3 years to avoid reverting to a high variable rate.

If you're happy not having branches and doing everything online, you should be fine.
Click to expand...
There are 'break fees' for getting out of the fixed term by the looks, but not after that. The loan type it reverts to seems to be their basic variable which is very flexible but with a non-discounted interest rate, and allows for early repayment without penalty, so should be able to change to a better loan type like one of their 'packages' (currently 5.07 variable - still better than CBA).
 
In that time of the fixed rate if your situation will not change and your don't need to sell or refinance, then go for it. Most people's do, and that's where the bank will win with most people.
 
D.T. said:
Interest rate is about 5th down the list on order of importance.
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Hi D.T., without going into too much detail, could you tell me what the first 4 or so things are most important to you when looking at finance options?

Cheers,
Ben
 
seen a few clients of mine move across.


it suits some............

but be aware, it is a bait and switch campaign with an end date.

ta
rolf
 
Rolf Latham said:
it suits some............

but be aware, it is a bait and switch campaign with an end date.
Click to expand...

It does seem a bit too good to be true...from what I've read they have been trying to build up their membership. When I rang them to ask about the 'fine print', etc today, they attempted to fairly heavily pressure/coerce me into "just putting in the application right now over the phone because the rates are going up and won't be at that level for long....(and lots of other reasons why it makes more sense to just do it now!).."

They now have a lender contacing me sometime in the next few days to answer all of my questions and give me the figures I'm after though, because I wouldn't just jump in...LMI is going to be the biggest consideration I can forsee, because I won't have 80% LVR and that's going to cost more than I will save in 3 years in rough figures. Maybe this is an option if I end up trying to get another property in the next couple of months though..

Going to hit up CBA branch in the next few days too and see what they will do for me, worth a try...they go through the motions and ring me every couple of months and ask how everything is going (even offered me a discounted interest rate on my personal loan last year), so I may as well!
 
Aaron_C said:
Do you even know what you require from the loan?
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Thanks, Aaron C. I thought I had a vague idea....but I probably have absolutely no clue as to what I 'require' from the loan I've had with CBA for 5 years, or the one I was thinking about replacing it with at a cheaper rate for now.

My query in this thread was simply looking at whether changing to a home loan that has a significantly lower interest rate is worth considering, most other features seemed to be on par. If I can lock it in for a few years, and have a 100% offset, great - and better than what I have now. I think I require similar features to the loan I already have - in particular 95% LVR, redraw, able to get Line of Credit/draw equity, no penalty for early repayment, interest only optional. Other than that, at this stage, I do not know what else I 'require' from the loan (I could say no monthly fees, etc, etc)... I may have missed something as it is really late here, and quite probably there are things I haven't considered or even come across yet which is why I'm on here reading through as much as I can and asking questions.

(When I go down the track of IP2 etc, I'm sure that may change my 'requirements' somewhat, but that is a different thread..and won't be for at least a couple of months, waiting on the valuation first...when I am ready to start pursuing IP2 I think I will look at contacting a Mortgage Broker)
 
pipsal said:
My query in this thread was simply looking at whether changing to a home loan that has a significantly lower interest rate is worth considering, most other features seemed to be on par.

(When I go down the track of IP2 etc, I'm sure that may change my 'requirements' somewhat, but that is a different thread..and won't be for at least a couple of months, waiting on the valuation first...when I am ready to start pursuing IP2 I think I will look at contacting a Mortgage Broker)
Click to expand...

You might want to consider doing that contact before you commit to going with lender X. I have seen dozens of outcomes that werent favourable because basics werent considered in the borrowers own assessment, and many times lender X ( and often even broker Y) have no idea on moving forward, and are very transaction focussed.

ta
rolf
 
Ben_ said:
Ok I take back what I said about not too in depth. Could you give me a little more detail on what it is you look for in any of the mentioned policies?
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Depends on the requirements. For example, if a client has bought a property with the intention to build 2-3 units on it, I wouldn't put it to a lender where their policy is to allow only one dwelling for construction. I would put it to the lender where the can simply get a loan increase later for the construction without having to refinance.
 
Am with TMB and just fixed. They'll charge you to break if rates go lower. All fees are lower. Not a scam. Just an ethical credit union turned mutual bank. Variable is 5.03 or something. Good deal if you don't need
loc yet. Also don't have offset. Only redraw.
 
Will have an offset later next month or in June. But the rate most lily won't be 4.49% fixed for 3 years by the time they roll out the offsets features.

Decent rate good for IP's...but not to sure abt PPOR purchase or active investors.
 
Last edited:
I might add that you need to be a teacher with evidence or a relative to take up this deal in my enquires, but a very good rate.

Cheers Mick
 
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