4.79% variable rate - is it good enough?

K

kristaje

Hiya All,

I'm just start looking around at mortgage options as some of our loans are going out of fixed period soon. Was offered 4.79% today for variable rate, full serviced account (with redraw, offset, etc) for LVR up to 80%. Searched around the SS but didn't see any recent thread on interest rate. Just wonder if this is a good deal?

Thanks.
 
kristaje said:
Hiya All,

I'm just start looking around at mortgage options as some of our loans are going out of fixed period soon. Was offered 4.79% today for variable rate, full serviced account (with redraw, offset, etc) for LVR up to 80%. Searched around the SS but didn't see any recent thread on interest rate. Just wonder if this is a good deal?

Thanks.
Click to expand...

Rate is decent. But doesn't mean it's a good deal.


Boxes are ticked for offset...

But you said redraw and offset... it it an acutal offset or redraw. You would want to be sure.

Can you have interest only? If you can how long and is it a tick and flick after that time frame or whole new application to go interest only again.

Whats the cash out policy like

How does the bank operate with re-vals

What are the establishment, monthly, package, offset, disharge, settlement fees...fees fees fees :) can kill any good rate.

Most importantly what's the service like that you will be getting from the bank. Will that be an issue?
 
Probably is.

Hard to say for certain without knowing the lender, amount, specific structuring of portfolio, etc.

It is possible to do better if you're looking at loans over $1.5M at 80% or better, or you could go to an online lender but they're probably going to have a problem with the borrower living overseas.
 
Rate in isolation is pretty hard to judge....I just got one approved for 4.60% but it was a substantial loan amount and strong client. More details please.
 
Hi Brady and PT Bear,

Thanks for fast replies! I love SS! :)

The offer is from Suncorp, interest only, can do redraw and can also setup an offset account link to one of the loans. No application fee. Part of lending under personal name, part under family trust structure.

We currently have some of the mortgages with them and happy with service level so far - have to say we've only use the offset account service so far, never did redraw or anything, but all went smoothly so far. If we do move some of the loans, total borrowing with Suncorp will be around $2.3m. Current lvr for those loans are tad below 50%, but the rate offered was for up to 80%, as we're looking top-up and place excess in offset account for emergencies / future opportunities.

PT Bear - yes, the living overseas thing is bit of a hurdle for some lenders unfortunately. I'd be interested to hear about the better possibilities you mentioned, if you don't mind.

I also just heard today that NAB in HK is offering Home Loans in HKD for Oz properties, which sounds great - but will need to investigate further on this.
 
With $2.3M you should be expecting rates around 4.70%, possibly lower. It's tricky to get a straight answer because lenders usually won't tell you for certain before they actually see the application.

4.79% isn't a bad rate, but it is probably possible to do a little better.

Loans in foreign income can be very attractive. Keep in mind that this brings the additional risk of currency fluctuations. The interest rate may be low but if the currency moves against you it may end up costing you a lot more than just the interest rate.

Additionally Australia has a lot of legal protection built into residential loans which you won't enjoy borrowing overseas. You may also fund that if the LVR increases beyond a certain level you can be asked to reduce the exposure similar to a margin call. This is another currency risk and it does occur.

If you understand and can accept the risk with foreign currency lending that's fine, but the generally good advice is to borrow money within the same country that the security property is in.
 
Thanks PT Bear, for all the info. Very good points you mentioned there. Will look around more and think about it over the Easter holiday.
 
kristaje said:
Current lvr for those loans are tad below 50%, but the rate offered was for up to 80%, as we're looking top-up and place excess in offset account for emergencies / future opportunities.
Click to expand...

Small issue that I can see happening is you if borrowed the funds and put them in an offset with your current savings/offset. This could be a tax issue as you would have borrowed funds with savings, which would result in mix purpose. Make sure any extra borrow funds is via a seperate loan with a seperate offset account that way you can keep the purposes seperate.

As for rate 4.79% is decent for $2.3M but like Pete I've also been able to get 4.7% (was for ~$1.5M) maybe look to push them a little harder.

Are you going to go over 80% in future?
 
As an aside to the rate discussion.........

If 2.3 is all, or most of your portfolio, lender concentration risk is something that is worth thinking about.

ta
rolf
 
Brady said:
Small issue that I can see happening is you if borrowed the funds and put them in an offset with your current savings/offset. This could be a tax issue as you would have borrowed funds with savings, which would result in mix purpose. Make sure any extra borrow funds is via a seperate loan with a seperate offset account that way you can keep the purposes seperate.

Are you going to go over 80% in future?
Click to expand...

Thanks Brady. Very good point re. offset account. I'm not looking of going over 80% in the near future, but think that it's good to get some AUD facility for buffer in the case of emergency - especially as we don't earn in AUD at the moment.

Sounds like I really need to look around / negotiate harder on the rate! :D

Rolf, we still have some fixed rate loans with other banks (at 5.95%-5.99%, Ouch!) due next year, but if we do this move then Suncorp will hold quite a chunk of our mortgages. Very valid point on the risk - I hadn't thought much of this yet. Thanks for raising this up.
 
Interest Rate

Hi Kristaje,
Recently with one lender I deal with, I've received 4.73% variable.
However, if we fix a 50% or less of it can get that fixed split at a lower rate as well.
Hope that helps!
 
Kapital said:
Hi Kristaje,
Recently with one lender I deal with, I've received 4.73% variable.
However, if we fix a 50% or less of it can get that fixed split at a lower rate as well.
Hope that helps!
Click to expand...

Plenty of brokers on the forum have Advantage on their panel.

Advantage would not be the lender I'd be recommending for this sort of deal. The lack of an offset is the obvious reason, but realistically they're not ideally suited to investors. They can be useful for a very basic set-and-forget type loan, but they are not where I'd put a large portion of a portfolio simply due to their lack of flexibility.
 
I agree with the boys. Advantedge have their place but tend not to favour large loans. Once they tried to price a $1.7m loan higher than one below $1.5m. They do have their place though of course for things like cash out and servicing leniency.
 
Rolf Latham said:
yeah but ......... Advantedge can drive clients over the edge :)

ta
rolf
Click to expand...

Sure can.

It can vary quite a bit - sometimes they give me headaches....and other times they're amazingly efficient.

Just had a formal issued in 24 hours so I'm liking them.....for the moment :)

Cheers

Jamie
 
Update

Thank you all, for the info and advice. At the end we negotiated with Suncorp for 4.7% variable rate, with offset account, redraw and early repayment options. No application or package fees charged. Quite happy with that.

We did considered ANZ and NAB dual-currency mortgages to take advantage of the current low rate in HK, but their requirements are quite restrictive, so we didn't go ahead with it. Just an fyi for some of you who maybe interested in it, the requirements are as follows:

LVR: max 40%
Loan value: min $500k AUD
Property value: min $1m AUD
Cash of 10% of mortgage value should be kept with the bank (as buffer to foreign exchange rate movement)
P&I
Establishment fee of AUD750 + valuation fee + other fees
 
kristaje said:
LVR: max 40%
Loan value: min $500k AUD
Property value: min $1m AUD
Cash of 10% of mortgage value should be kept with the bank (as buffer to foreign exchange rate movement)
P&I
Establishment fee of AUD750 + valuation fee + other fees
Click to expand...

40% lvr + 10% cash buffer - no wonder you got offered 4.70%....
 
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