any harm in borrowing from unknown lenders?

Hi there

I am going to borrow for my third IP after years! and I have found a lender (WAW Credit Union) it's rate is %6 compared to my Bank's which is %6.99 for variable interest only loan. I have already got offset account and other facilities with my other bank. I am wondering if there is any reason why I should not with the lower rate? Does it matter if the lender is not a well known one? I will appreciate all your insights.
Yadeh
 
It's great that you've been able to find a lender with a very compeditive rate. Make sure you understand all of the implications of the loan. 6% is well below what any lender is making available, outside of a honeymoon rate. You may want to verify what the 'comparison rate' is for the proposed loan. This loan could be more expensive in the long run.

Most lenders are effectively delivering effective ongoing rates betwen 6.5% and 6.8% at the moment.

One of the problems with lenders offing really low rates in the past, is that it simply wasn't sustainable for them. As money became tight during the downturn these lenders had trouble continuing their funding and sustaining their business. Their rates went up and they became some of the most expensive loans in the market. Exiting these loans can also be extreamly expensive.
 
One of the problems with lenders offing really low rates in the past, is that it simply wasn't sustainable for them. As money became tight during the downturn these lenders had trouble continuing their funding and sustaining their business. Their rates went up and they became some of the most expensive loans in the market. Exiting these loans can also be extreamly expensive.

So make sure the deferred establishment costs (exit costs) are not material.

Also, if just because it's a lower rate, don't borrow more than you can service at a normal rate, in case you need to refinance at a normal rate.

Other than that, they're lending you the money, so there's less to worry about compared to if it was the other way round.
 
free lunch :)

Someone has made a boo boo somewhere

I had a client recently who was to swear on a bible his ongoing wbc rate was going to 6.06, turns out the docs are wrong. yet to see what the lender will do.


id find out the source of the funds. If thet are borrowing ver short and lending long. 30 to 180 day bonds backing a mortgage of30 years is poor business sense in todays unkown environment.


ta
rolf
 
Thanks guys for the feedback s. Now you made me scared of going direct to those unknown lenders. I suppose for novices like me it is better to go either to my bank or a mortgage broker.
 
Often smaller lenders are fine, just make sure you understand the terms of the loan properly before committing.

The information on their website indicates that you've been looking at a honeymoon rate, which is more expensive in the long run. There's also no mention of exit fees which is a concern. All of their loans do appear to be more expensive than most of the more mainstream lenders in the marketplace.
 
unfair exit fees will be abolished 1 july which is good. I still think there is a fair argument for the implied terms for some of these mortgages with clowns like pepper, macquarie, old rams etc.... to hike rates and hold a large exit fee is like tying you up before pointing the gun to your head
 
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