Breaking Free from ANZ Break FREE
- Thread starter HomeBuyAU
- Start date
In my opinion this is very dangerous advice from your accountant!
This could result in the interest you pay not being 100% deductible when you re-draw to use the money for travel. Your repayments would also then have to be split between the deductible and non-deductible parts of the loan
I would definitely seek the advice of an alternate accountant that is IP savvy as the effects could be long term.
Well here is the email I got, not really that helpful really and as much as I liked them it might be time to look for a better accountant for the next tax return:
From what I understand I have the mortgage and then there is a savings account attached to it with the redraw coming out of the mortgage. If I have income then it would go to the savings account and unless it picks up dramatically then I will be just using my income to live off and maybe I will also have to chip at the redraw as well sometimes while I travel. Since I have an Internet business then I totally rely on Google and one day I can be making $500 per day, the next like now maybe $50 if I'm lucky.
So nearly $400 bank fees due in just over a week is not a big deal for many people but at the moment it's not good for me espcailly as I need every cent for my trip overseas soon.
hhmm, I'm starting to think locking in might be a good option for me too now as on the current rate of 6.6 my apartment is just slightly negietive, with 5.8 it would probably be positive.
I have about 1 hour and 20 minutes before I sign my life away.... what to do
Often the comaprison rate may not be taking into account the discounts after the fixed term expires. It may be assuming the standard variable.
In this case however, if you read the fine print you'll find that the comparison rate is based on a loan amount of $150,000, for which the discount is substantially less. With this level of borrowing the ANZ Breakfree tends to have high ongoing costs when compared to the rate, so it's not the cheapest product out there.
In a nutshell, comparison rates are rubbish, because they're applied to a mould that most people don't fit into these days.
In this case however, if you read the fine print you'll find that the comparison rate is based on a loan amount of $150,000, for which the discount is substantially less. With this level of borrowing the ANZ Breakfree tends to have high ongoing costs when compared to the rate, so it's not the cheapest product out there.
In a nutshell, comparison rates are rubbish, because they're applied to a mould that most people don't fit into these days.
I think we are starting to suffer from confused knowledge here. Im quite clear from what you said so far with 50,000 cash available and being concerned about interest rates and fees, it makes little sense from a cash flow perspective to look at locking away the interest rate and isolating the $50,000.
Obviously if your taxable income is very low, and you can look at putting the $50,000 into some form of high interest-bearing deposit account, such as ING, and pay a lower amount of income tax on the, then the fixed rate may be the way to go, purely from a cash flow point of view. Be aware of the restrictions associated with fixed-rate loans no offset no redraw minimal extra repayments.
ta
rolf
Media Release
For Release: 10 February 2012
ANZ February 2012 Interest Rate Review
- variable rates for mortgages and small business increase by 0.06%pa;
three year fixed rate mortgage cut by 0.15% to 5.99%pa -
ANZ today announced it will increase interest rates for variable rate mortgages and small
business lending by 0.06%pa while reducing the three year fixed rate package mortgage by 0.15%pa maintaining competitive interest rates for customers.
For Release: 10 February 2012
ANZ February 2012 Interest Rate Review
- variable rates for mortgages and small business increase by 0.06%pa;
three year fixed rate mortgage cut by 0.15% to 5.99%pa -
ANZ today announced it will increase interest rates for variable rate mortgages and small
business lending by 0.06%pa while reducing the three year fixed rate package mortgage by 0.15%pa maintaining competitive interest rates for customers.
Break costs are event driven fees and as such are excluded from CR calculations.
Kind of. The maths involve taking the rate fixed rate for a period x years, the contracted variable rate for the remaining term, and then applying that to the $150k example.
The fact that the deal in question may not be available for a $150k deal, doesn't mean the rate isn't applied to calculate the comparison rate. The primary impact in using the $150k figure for deals pertaining to much larger loan size is that the fees have a disproportionate impact.
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OK, I went to the bank on friday and met with the woman there who seemed much better than the one I met a few days earlier who just seemed to want to sign me up with no regard to my situation.
I explained to her my circumstances etc and she was genuinely helpful,. She told me right away that I was wasting my time to try to go for this other loan on interest only with my income being low. She was trying to look at better options for me. I asked her about fixed term. So in the end I decided to go with a fixed 2 year P & I loan so I will be paying slightly more each month. Currently I have been paying around $1100 per month for the apartment repayments. If I change to a P & I loan on 2 years fixed rate I will have repayments of around $1220 per month but over 2 years I would have reduced my mortgage down about 5k from just under 200k loan. I would have no breakfree fee anymore and she said she will get me out of paying the $200 loan fee or something.
As for the 50k, actually I have over estimated how much I will have. I have to pay some things etc so after that I will have just under $30,000. She said that as I'm not earning much then I should not have too much issues with tax but she told me to talk to an accountant but I told her that she seemed to know more than my accountant anyway.
So yes there will be no offset or redraw account with the fixed P & I loan but I can be earning about 4.8% if I put that into a flexible ANZ savings account. I would also get rid of my cc card and change to a debit card I think to save on charges although I'm a little worried that I might have issues with a debit card when I travel?
The only fees would be $5 per month on the savings account.
So how does this look now? I can still stop it I guess as she won't get it done until a few days I guess but from what I understand I think this could be my best way to go. Yes I will be paying $120 per month more but at least I'm actually saving that money for my future. I have always liked the idea of P & I even though I know I/O is better for serious investing but I never save enough anyway for I/O to work for me. At least this way I'm forced to pay something off even just chipping away at it a little.
I can say without a doubt this woman at the bank was genuine and not trying to think of commissions but was really looking out to help me. Weather this is the best way to go is another thing and I would be interested to hear from others here what they think of this new approach? btw, she worked it all on the fact that I would not have to submit my income docs and go through credit checks etc.
I think you can do better than an ANZ savings account, especially given that ANZ do have products with a higher guaranteed return. Given that you've fixed for a few years, a term deposit for a similar period of time may also be more appropriate.
http://www.anz.com.au/personal/bank-accounts/term-deposits/
The main problem with this sort of product is that it doesn't give you easy access to your funds. The big 4 banks actually have some of the lower returning savings accounts available. If you truely are interested in options, I suggest you look further afield. Take a look at ING or UBank. Genuine or not, the person in the branch has a vested interest in getting you to sign up with their employers products.
Realistically though, you'd probably be better off with an offset arrangement with a second tier lender.
http://www.anz.com.au/personal/bank-accounts/term-deposits/
The main problem with this sort of product is that it doesn't give you easy access to your funds. The big 4 banks actually have some of the lower returning savings accounts available. If you truely are interested in options, I suggest you look further afield. Take a look at ING or UBank. Genuine or not, the person in the branch has a vested interest in getting you to sign up with their employers products.
Realistically though, you'd probably be better off with an offset arrangement with a second tier lender.
