FHO - Which loan?!

Hey Guys,

Looking at getting into my first IP inside this month to grab the full FHOG+bonus.... I'm looking at an 180k Property that generates 180p/wk rent with an 80% LVR....

Obviously I'm going to have to "live" in this place for a while so I'm eligible for the grant. I just don't know what type of loan I should get yet. I will be cash poor once I'm in so I guess an offset is a waste of time. Should I Do P&I untill I move out, or just get an IO loan straight off the bat?
 
Hiya

An offset may look like a waste today, but may be of benefit in the middle term

Id look at IO from the start if you can get it

ta
rolf
 
Thanks Rolf.

I've been looking at ANZ loans simply because I've been banking with them for over 12 years now and have a good relationship.... So many packages to choose from! and since this is my first time I've really not sure which to pick because I'm not sure what I will or wont use in the future..

Should I lock interest rates for an extra $10 per month (bank fee) ?
Go with the simplicity loand and save .8% interest but have a few features ?
Equity manager loan ?
Std variable ?
 
Jus

Anz like most of the majors have a nice complex range of products.

Why not give someone like Pete T a call from the forum and get him to run the numbers thru for you and lodge the application.

You will be suprised that even though you have been an existing customer for many years a credit submission is totally different and the local branch will have no sway in getting the deal done right.

A good mortgage broker can lend a little weight where needed.
 
I've had a MB suggest that the best offset option for me is the Homeside Offset Loan - Low Doc, which has:
*5.13% variable interest rate,
*$600 application fee,
*$300 exit/break fee,
*only $8/month fee for the offset functionality, which is significantly cheaper than most/all other banks as far as i'm aware.

Does anyone know whether there's a catch to this loan? it seems to beat all other offset options out there for me. Can you easily tell whether this loan is similar to the St George offset loan which "works whereby the money in the offset reduces the principle and not the loan repayments" (from http://www.somersoft.com/forums/showthread.php?t=55339)

Perhaps someone can confirm for me whether this bank is suitable to lump in my future 2nd property's loan into to perhaps get a better rate; or at the least, can i use the offset functionality for both loans so that i'm not paying a second monthly/annual fee for an offset account on my 2nd loan with a different bank?

http://www.ratedetective.com.au/home...-doc-60491.htm
 
to be honest i didnt even realise it was a low doc until i posted!
I know Low Doc's are typically for people who do not qualify for a traditional home loan to buy a property, but this one looks more like a regular offset-type home loan to me?!

apart from its name, what makes it low-doc?
 
So u dont need a low doc :)

Thats what Im asking.

The base product u have listed is the same pretty much on full doc

ta
rolf

can you tell me which full-doc loan(s) beats this? i'm after one with low monthly servicing fees (only $8/month!) but a competitive std variable rate at the same time. Isn't the NAB offset option like $33/month ($395/yr i was quoted) and NO better with the interest rate? i can't imagine their exit fee to be as good either...
 
Approx when do you want to settle this loan :)

My experience with Homeside is closer to Lost Side Im afraid, we have a couple of deals in that are > 90 days old and still not settled :(

You mention other properties in the future etc .

If you are going to do other Ips in the future under the same lender, a pro pack product with the ONE annual fee may work better for you, perhaps a worstpac or an ANZ breakfree or the like.

ta]rolf
 
Barry, not sure whether you loan is $300k or less. If its $300k Homeside homeplus at 5.07% nil application $10 per month may be worth a look. But as Rolf said, their service sucks.
 
Thanks Rolf - I'll have a look into westpac & ANZ as you suggest.

Barry, not sure whether you loan is $300k or less. If its $300k Homeside homeplus at 5.07% nil application $10 per month may be worth a look. But as Rolf said, their service sucks.

Loan amount would be about $340k, give or take. On paper, this deal appeals to me very much, but after your (and Rolf's) comments, i'm having second thoughts. Couple more q's:
1) by servicing, is it just their settlement that you consider to be very slow/bad, or is it other aspects of their institution too?
2) do they have any branches that one could go into to talk to someone in person? (living in Brisbane)
3) Would Homeside not have the option to lump another loan into this one and pay the one fee (as Rolf suggests above)?

thanks guys - appreciate the help!
 
Thanks Rolf.

I've been looking at ANZ loans simply because I've been banking with them for over 12 years now and have a good relationship.... So many packages to choose from! and since this is my first time I've really not sure which to pick because I'm not sure what I will or wont use in the future..

Should I lock interest rates for an extra $10 per month (bank fee) ?
Go with the simplicity loand and save .8% interest but have a few features ?
Equity manager loan ?
Std variable ?

Tough one to make a call on without knowing your financial position and whether you have any existing lending with them. Every chance there could be another institution that fits the bill.


Regards
Steve
 
Barry

1) by servicing, is it just their settlement that you consider to be very slow/bad, or is it other aspects of their institution too?

A) Every client has his own experiences with lenders but i am with Rolf in saying that not only is Homeside processing hard to live with but once you become a customer the service doesnt seem to get much better.


2) do they have any branches that one could go into to talk to someone in person? (living in Brisbane)

No unfortunately they are branchless and the NAB branch network knows nothing about Homeside and really couldn't care anyway.

3) Would Homeside not have the option to lump another loan into this one and pay the one fee (as Rolf suggests above)?

Sure like anything it comes at a cost. A Pro Pack might suit better especially if your porfolio starts to grow and you need to split the loans and work them to suit your needs.
 
The IP I'm looking at is asking $185,000 but I will try get this down a bit... The FHB grant will give me access to $16,000 and I'm going to use up to 21,000 in savings. So if the loan is for $185,000 + 6% fees = $196100 worst case?.. Correct me if I'm missing something...

I'm approved for $159,000 which is plenty because if Im paying the figures above I will only need that ammount.. And the loan I am looking at is the ANZ simplicity plus @ 5.18% IO..

I will have to live in the prop for 6months to get the grant but its currently bringing in 170pwk..
 
The TARDIS Is An Investor's Best Friend!

G'Day there Jus and Welcome to the Forum

When considering a purchase and loan structuring it is important to stand back and to look at the transaction in space and time.

Put yourself in the TARDIS and look back at this transaction.

Did you strucure it well? Did you set it up so that it provided the most benefit at time of purchase - as an owner occupier, and has that benefit been transferable to the later purpose of investment?

Hindsight is a wonderful thing and as a would-be investor, you can view the transaction with hindsight before you set it up.

The primary question is:

Will this be your first, last and only property?

If yes, then establish your loan in the conventional way – borrow the least you can with a Principal & Interest loan, and pay the loan off as soon as you can.

If no, and if you intend to buy other property and to convert this first purchase into an investment, then consider using the least amount of funds with the most flexible loan available to you.

You are looking at buying a property for about $185,000 (in Victoria). With Stamp Duty, legal and finance costs and adjustment for rates this will require about $193,500 to settle.

You have said that ANZ have pre-approved you for a loan of up to $159,000. ANZ approve loans based on a 30 year Principal & Interest loan, so that would imply that you earn about $31,000, not taking into account any credit cards etc

If you want to have an Interest Only period, ANZ calculate the remainder of the Term as Principal & Interest, so you would be able to borrow less if you want an Interest Only period with an ANZ loan.

Other lenders do not consider Interest Only periods to be ‘credit critical’ and do not necessarily apply this inhibitor to the calculation of borrowing capacity.

So let us assume that you buy the property with a loan of $159,000 and contribute $34,500 (FHOG $16,000, Savings $18,500). You have a bit left over to help with mortgage payments during your six months of occupation. Fair enough.

But what about if you borrow a bit more? Without knowing your actual income, but based on $31,000 gross per annum, you could probably borrow up to about $165,000, about 89%LVR.

This would incur some mortgage insurance, let’s say $2,759, so your total loan would be about 167,759. Funds to Complete would have increased to $196,259(approx) and you would contribute $28,541, leaving you about $8,500 in reserve.

Now, this is where it starts to get interesting.

You have now established a borrowing point for this property. This is the only opportunity you will ever have to do this for this particular property. Yes, you may increase borrowings against the security at a later time but you can only buy it once. The later borrowings will be for another purposes, and therefore belong to that purpose, or be used for eg renovations or improvements to this property, but you can not buy this property again.

Stamp duties and other costs associated with the purchase of the property are capitalized to the cost base.

Adjustments at settlement are expenses in the year they are incurred.

Finance costs can be amortised over 5 years or the life of the loan (1,826 days). So if you live in the property for six months, that means you still have 1,643 days of amortization remaining. This helps to put finance costs, and mortgage insurance, into perspective – and enables you to have some funds in reserve and for those funds to form the nucleus of further savings to get you the second property, sooner.

So as you can see, just one aspect of structuring your loan can have a major impact on the future benefit of the loan, particularly as your income will increase considerably once you start to receive rent income.

The other factors to consider, such as using the least amount of cash flow – Interest Only payments, not Principal & Interest, could make the difference of up to about $200 per month.

As you will be paying Rates, Insurance, Body Corporate, Repairs & Maintenance which will probably come to about $200 per month, is there any reason to pay Principal and to be committed to paying it?

Repaying Principal permanently reduces the balance of the loan for tax purposes, fine if you are going to be living there indefinitely as you could (depending on the loan) save interest and redraw the funds if needed, but with the benefit of the TARDIS would this hamper you with future investment plans or reduce the tax benefit of the loan set up?

While we can not know about next year or even next week, if you start as you mean to go on you will incur fewer costs, build in greater flexibility and have some financial breathing space for the coming six months of owner occupation.

Hope this helps
Kristine
 
Hi Kristine,

Thanks for your response, very informative!

Tho I don't fully understand because I'm still a noob to property.. I do intend to use this as an IP. I will live in it for 6-9mths and then rent it out and move back to where I am now.. I'd like to be able to buy an IP every 18months, maybe 12 if possible..

$185 is just the starting figure for now, I am currently negotionating with the owner. So if I have translated your post correctly into my own language, your saying to borrow as much as I can and go IO? I did intened go with an io loan but I was going to use as much savings as I could to keep the weekly repayments down. I also fear interest rates rising which would increase repayments further. But if I were to borrow more and pay the extra couple of tens per week to get me into my next ip sooner that would work out better I guess.. I want to put myself in a safe lending postition so if things were to go bad for whatever reason I'd not own 95% lvr props. I would like to aim for 70% lvr. Does this make sense?
 
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