Loan comparison: buying a home with loans.com.au?

[ozcherry]

I am hoping to buy my first home soon. In doing my home loan research, i found loans.com.au to be the one with the best variable rate (5.65%) at the moment and comes with an offset account. But as it is a call center based company with no physical branches, i am not sure whether the savings are worth the risk of using them to buy my home. Anyone has dealt with them before?

I am looking to buy a property around 400k, and would like to get the maximum loan without the insurance and put extra money in an offset account. So it will be a loan of around 320k.

The fees for this "dream catcher" loan from loans.com.au is $375 annual fee, $0 application fee, the valuation is $220 (valuation is free with banks if my understanding is correct).

Other options with an offset account are:

1. The commonwealth bank, 6.05% variable rate. The mortgage manager will waive the application fee and the package fee for the first year for me. I have got pre-approval with them, which makes it the easiest option for me.

2. A package from NAB, with less than 75% borrowing, at a variable rate of 5.95%. The fees will be $160 setup fee, and $10 per month account keeping fee.

3. "Mortgage Plus" from Citibank, with a variable rate of 5.89%, which has a $399 application fee, and the $355 package fee is waived for the first year.

I intend to get variable rate only, and i am thinking not to be locked in with one lender and may refinance if better deals come out from somewhere else. I am not sure i am thinking in the right direction on this or not.

It might be the case that the difference of the interest rate between these options i listed here are not that big on my loan amount and i'd better stick with the easiest one. But i am just not sure.

Any advice on this "loan" matter would be much appreciated.

Thanks in advance.

 

[Aaron_C]

So what are you asking exactly? You've done the research haven't you?

 

[ozcherry]

Sorry, i have talked too much without making my point clear.
I have listed all the facts, just want to know what you think is my best option. Would the cheap ones tend to cause more headaches in the buying process?

 

[Marty McDonald]

I think you know the answer to that.

 

[Aaron_C]

If interest rate is the most important thing to you, then go with the online lenders like loans.com.au.

 

[Peter_Tersteeg]

loans.com.au are cheap, no doubt. Is that all you're interested in?

Most of the cheaper lenders are very restrictive in terms of other things. These restrictions often make them completely unsuitable for investors. A quick glance at their products reveals the following:

* They call their offset account at "100% redraw offset". This is not the same thing as an offset account and could have some nasty tax implications for an investor.
* The rates they quote tend to be for low LVR loans. For loans above 80% their rates start at 6% (and every broker here will tell you they can beat that).

 

[Rolf Latham]

Loans.com and other cheapies like Ubank have their place

If you are asking is it the right product/service/advice equation .......I think you have answered your own question. Do some product reviews, they are openly available out there.

I have LOTS of folks that come to us wanting to know "what is the best rate" and if that is the primary and only need then a referral to loans.com or U bank et al is appropriate.

Both of those are reliable sources of funds, with loans.com being funded by securitised funds through Firstmac and Ubank being funded by NAB and administered by Advantedge.

Like all lenders they have their pros and cons, and wont do some stuff others may and vica versa.

In the end be glad you have the choice

ta
rolf

 

[ozcherry]

loans.com.au are cheap, no doubt. Is that all you're interested in?

...

* They call their offset account at "100% redraw offset". This is not the same thing as an offset account and could have some nasty tax implications for an investor.

Yes, i read this "100% redraw offset" and wondered whether it is an offset account. The property might turn into investment property down the track, so it is not, I will have to steer away from loans.com.au.

 

[Loanscomau]

Yes, i read this "100% redraw offset" and wondered whether it is an offset account. The property might turn into investment property down the track, so it is not, I will have to steer away from loans.com.au.

Hi Ozcherry,

Thank you for your question regarding our 100% redraw offset account. I refer to a previous thread we participated in October 2011, where we explained how this account works. You can view this thread here - http://somersoft.com/forums/showthread.php?t=74366

We offer both redraw and offset at loans.com.au.

- Re-draw; you can make additional repayments (higher than minimum or lump sum) on our loans and redraw the additional payments via internet and phone.

- 100% offset; The product is called a redraw-offset account as its set up slightly differently to a bank offered offset account because we aren't a bank. It operates in the same basic way as an offset. For example; if you hold a loan of say $100k and hold a balance in the offset of say $10k, interest is calculated on the net balance of $90k on a daily basis.

Most importantly, the offset carries its own balance (separate to the home/investment loan) as it's a sub-account linked to the loan and is suitable for Investors. You can access your funds via phone, internet and a linked visa debit card (EFTPOS, ATM, etc). There is no minimum withdrawal and no fees other than some ATM use.

Given the nature of this conversation, being a forum, we suggest that you seek professional advice or speak to us directly to discuss any further questions.

Kind Regards,

Jason
loans.com.au

 

[Peter_Tersteeg]

Yes, i read this "100% redraw offset" and wondered whether it is an offset account. The property might turn into investment property down the track, so it is not, I will have to steer away from loans.com.au.

Unless they're a 'deposit taking institution', you'll usually find that they're simply setting up a redraw feature to look like an offset account in their systems.

 

[Rolf Latham]

Hi Ozcherry,

Thank you for your question regarding our 100% redraw offset account. I refer to a previous thread we participated in October 2011, where we explained how this account works. You can view this thread here - http://somersoft.com/forums/showthread.php?t=74366

We offer both redraw and offset at loans.com.au.

- Re-draw; you can make additional repayments (higher than minimum or lump sum) on our loans and redraw the additional payments via internet and phone.

- 100% offset; The product is called a redraw-offset account as its set up slightly differently to a bank offered offset account because we aren't a bank. It operates in the same basic way as an offset. For example; if you hold a loan of say $100k and hold a balance in the offset of say $10k, interest is calculated on the net balance of $90k on a daily basis.

Most importantly, the offset carries its own balance (separate to the home/investment loan) as it's a sub-account linked to the loan and is suitable for Investors. You can access your funds via phone, internet and a linked visa debit card (EFTPOS, ATM, etc). There is no minimum withdrawal and no fees other than some ATM use.

Given the nature of this conversation, being a forum, we suggest that you seek professional advice or speak to us directly to discuss any further questions.

Kind Regards,

Jason
loans.com.au

Hi Jason

We have been here before.............

Given the propensity for this "real offset or not" issue to be a real sales hurdle for you, I am amazed that FM havent trotted out a depersonalised PBR from one past or existing clients, with a disclaimer that one should seek their own advice, but...

That would solve the question pretty much, and not require a "psssssssst" come over here conversation.

Note Im not on either side here, the issue is that there is a specific product concern that has been and will continue to be raised.

Want to sell more product ?

Kill the doubt.

ta

rolf

 

[Loanscomau]

Hi Jason

We have been here before.............

Given the propensity for this "real offset or not" issue to be a real sales hurdle for you, I am amazed that FM havent trotted out a depersonalised PBR from one past or existing clients, with a disclaimer that one should seek their own advice, but...

That would solve the question pretty much, and not require a "psssssssst" come over here conversation.

Note Im not on either side here, the issue is that there is a specific product concern that has been and will continue to be raised.

Want to sell more product ?

Kill the doubt.

ta

rolf

Hi Rolf,

Thanks for your feedback. We are in this capacity to be an advisory service, not to push or sell product. We are here to provide clarity and factual advice only. However, more than happy to discuss specific situations with anyone directly if they would like to seek further advice from us. I have attached some recent feedback from one of our existing customers:

“For those wondering about the offset setup for investment property or other reasons, I can confirm it is truly 100% offset. The offset (daily) account has no interest paid to it, but the loan account has 2 lines for interest each month. One line is a notation showing the amount saved by the offset account, and the other line is the posting line that shows the interest charged (shown as the amount after the offset is applied).”

As you mentioned, it is extremely important that all customers seek financial and legal advice when considering their own needs.

Kind Regards,

Jason
loans.com.au

 

[Marty McDonald]

I'm with Rolf. Your firm should get an ATO ruling or at least senior legal opinion and rest your hat on that. Until then I can't just accept your word for it.

 

[Aaron_C]

Yeah I agree with rolf etc. The problem is are you putting the word 'redraw' in front of 'offset' to cover yourself if someone says you misled them under the Consumer law? Not trying to attack you but clarity would be best for all consumers involved.

 

[Terry_w]

Jason,

Does the 'offset' come with a separate account number and is the contents of this account clearly separated from the loan account?

 

[Marty McDonald]

why delete that post Euro. Read it last night and thought it was quite uliminating.

 

[Loanscomau]

Jason,

Does the 'offset' come with a separate account number and is the contents of this account clearly separated from the loan account?

Hi Terry,

Thank you for your questions, and yes you are correct the offset has its own separate account number, and each account is issued its own statements, along with the ability to view each account online.

Rolf has mentioned earlier in this thread loans.com.au is a part of Firstmac, who have been a wholesale funder for over 30 years. This offset facility has been a part of the home loan facility for many years for owner occupiers and investors.

You are probably aware that our industry is governed by NCCP (National Consumer Credit Protection) so while we can answer generic questions online, we are very hesitant to provide specific advice. I should clarify that’s why we wish to take these conversations offline so we can speak to our customers directly as everybody’s situation is different. We are very transparent about this and are not trying to hide anything. Under the NCCP legislation we can’t sell a product to a customer that doesn’t suit their needs, as this is not responsible lending.

Saying that, as a professional organisation in this industry, we believe that our clients should always obtain qualified independent Legal and/or Financial advice, tailored to their specific circumstance in considering which product best suits your needs/goals.

Compliance with this legislation is important to ensure general comments remain factual in nature are not taken out of context, as the risk around “advice” is how it could be applied to someone’s circumstances without understanding the complete picture.

So with that said, we are happy to discuss with you directly your individual situation and how we can help.

Kind Regards,

Jason
loans.com.au

 

[Rolf Latham]

Hi Terry,

Thank you for your questions, and yes you are correct the offset has its own separate account, and each account is issued its own statements, along with the ability to view each account online.

Rolf has mentioned earlier in this thread loans.com.au is a part of Firstmac, who have been a wholesale funder for over 30 years. This offset facility has been a part of the home loan facility for many years for owner occupiers and investors.

You are probably aware that our industry is governed by NCCP (National Consumer Credit Protection) so while we can answer generic questions online, we are very hesitant to provide specific advice. I should clarify that’s why we wish to take these conversations offline so we can speak to our customers directly as everybody’s situation is different. We are very transparent about this and are not trying to hide anything. Under the NCCP legislation we can’t sell a product to a customer that doesn’t suit their needs, as this is not responsible lending.

Saying that, as a professional organisation in this industry, we believe that our clients should always obtain qualified independent Legal and/or Financial advice, tailored to their specific circumstance in considering which product best suits your needs/goals.

Compliance with this legislation is important to ensure general comments remain factual in nature are not taken out of context, as the risk around “advice” is how it could be applied to someone’s circumstances without understanding the complete picture.

So with that said, we are happy to discuss with you directly your individual situation and how we can help.

Kind Regards,

Jason
loans.com.au

looooooooooooooong bow to draw between NCCP and "tax advice" surely.

There is no specific advice required here, general advice will do just nicely.

Either the product is OR is not compliant to the extent that a client can rely on the lenders advice that the product is "comparable" to other offset products from a taxation perspective.

Its this simple, or complex

If a loans.com or FM borrower has an IP facility of 100 k and places 100 k into the "offset", and then later uses the 100 k from the offset to buy an owner occupied home, is there contamination of original 100 k loan from a tax perspective.

If no contamination, the 100 k was deductible before the 100 k into the offset then it should be deductible after the 100 k is removed from the offset ( no other complications, and only those 2 events in the scenario, nil other transactions)

From what I have seen Id hazard YES, but im not accredited with FM, nor do I have clients who have a PB that I can rely upon, BUT FM, and many of FMs "mortgage managers" would do.

So my view, put up evidence or an FM endorsed statement that people can act in reliance of ( with a huge disclaimer even) , or .........dont.....then people can draw their own conclusions.

Im not being difficult here, I am attempting to get clarity and light for potential customers of FM and related entities.

ta
rolf

 

[Marty McDonald]

Jason enough with the seek advice and disclaimers. NCCP has nothing to do with this nor is it neccesary for specific individual advice.

Find out if the product is OK from an interest contamination point point of view (I think it probably is OK by the way) then answer the "GENERAL QUESTION".

 

[htopg]

The offset arrangement from loans.com.au seems ok according to the following tax ruling
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR936/NAT/ATO