New loan charging less interest upfront

[mja]

Investor's Direct Cash Flow Loan Fees

Hi all,

I've just got a page from Investor's Direct with some pertinent details about their Cash Flow loan.

Interest-Only for 5 years.
Monthly repayment.
80% LVR Max for Borrowings <= $750k
75% LVR Max for Borrowings <= $1.25m
Loan application upfront fee (Commitment fee): $375
Legal fees: $500 (payable at settlement)
Title Insurance: 0.04% (payable at settlement)
Completion Fee: $500 (payable at settlement)
Annual fee: $250
Risk fee: 1.5% of loan amount, payable at settlement (or capitalised)
Redraw: First 3 redraws a month are free, min $50
Rollover: Available after 2 years, at discretion of lender
Rollover Fee: New valuation costs + 0.50% of initial loan amount
Statements: 6 monthly
Location: All metro areas
Deferred Establishment Fees: 3.5% - Year 1, 2.5% - Year 2, 2.0% - Year 3, 1.0% - Year 4, 0.5% - Year 5
Capitaliser Rate: 4.25% less capitalised fee - Year 1, 3% - Year 2, 2.0% - Year 3, 1.0% - Year 4
Rate Reduction: 0.5% pa after 4 years
Capitalised fees: Up to 3% of fees may be capitalised by reducing the first year's capitaliser rate.
Purpose: Residental Investment
Special Features: 100% second job, 100% Overtime, Interest Capitalisation, Interest Only, Investor, Redraw, Nil LMI, Fortnightly repayments, interest rate reduction for clear payment history.

-- MJ.

 

[mja]

My understanding is that there are no break cost fee's if you refinance within two years

Yeah, but there's a 0.5% rollover fee + revaluation costs.

-- MJ.

 

[DavidMc]

Yeah, but there's a 0.5% rollover fee + revaluation costs.

-- MJ.

Also the deferred establishment fee. It's the fancy new name for break cost.

This would be $6,000 if you left during year 3 on a loan of $300,000.

(BTW I think it’s reasonable for InvestorsDirect to charge such a fee).

Thanks for the details MJ.

 

[TomL]

My take on the loan

Heres what I put together based on previous info.

Lemme know if theres any problems in there...

 

[D.T.]

Hi

Assuming DavidMc's spreadsheet is correct, it could be a decent product if you're the kind of investor who 'knows' a certain suburb is going to appreciate alot in the short term, and therefore would aquire multiple properties in the area. Based on the -12600 cashflow vs the -1800 cashflow, it'd help that investor afford 6 times as many homes in the area.

Ride the wave upward, refinance elsewhere and retire. Don't come crying here if the area performs badly and you're stuck with >150 LVR though lol

It might be interesting if existing clients can 'refinance' back to the same product, eg get back to 3.5% after 4 years and start the process over again

 

[mja]

Hi

It might be interesting if existing clients can 'refinance' back to the same product, eg get back to 3.5% after 4 years and start the process over again

Yeap, that's the idea. After 2 years you can start over again at 3.8% (or whatever the rate is), after you pay a rollover fee + associated costs.

Just beware the deferred establishment fee.

I'm concerned that there a quite a few fees payable to get the loan off the ground...

-- MJ.

 

[D.T.]

Yeap, that's the idea. After 2 years you can start over again at 3.8% (or whatever the rate is), after you pay a rollover fee + associated costs.

Just beware the deferred establishment fee.

I'm concerned that there a quite a few fees payable to get the loan off the ground...

-- MJ.

Well then, in that case, perhaps someone here better at maths than I am could work out the 'effective' rate of interest, then. Ie 3.8% plus rollovercosts and see if that works out any cheaper than a normal variable product.

 

[Ebbie]

Ride the wave upward, refinance elsewhere and retire. Don't come crying here if the area performs badly and you're stuck with >150 LVR though lol

Since the initial loan starts at 80% LVR, I think I recall Bill saying the new LVR on this loan after 5 years (without any capital growth) would be 89.3%.

 

[grossreal]

hi all
you would need to do two sets of excels.
1. an area with a 10% increase in growth and loooking at refinance at the 3.5% rate and
2. same area with a 10% decrease in value and trying to refinance at that level.
not sure of a lender that is going to increase your lend on a property that has been devalued and is below your original purchase price but leave that little hairy question aloan(play on words) for this process.
interesting to see if our excel experts can knock this up using the cost of mja as I think his will be close enough to the correct figures.
I have not ruled out this product but until I get to see what it is and who's behind it I hold my judgement.
just a side issue and has nothing to do with this product but when mezzainie funding was flavour of the month and everyone wanted to get involved alot of people got burnt because the funders ( privates ran out of money) and so you were stuck with a site that had mezz on it but you couldn't get the funder to give you the money as they had non to give it was already in the market place.
products come and products go, they do look good but I am a bit of a stickler for the fine print.
anyway if someone can have a try at doing a comparison it would be good.
the last one is of interest to me as I wouldn't like a fixed 5 year term and be in a slide.

 

[Mary]

products come and products go, they do look good but I am a bit of a stickler for the fine print.

Maybe those that went to michael yardney's seminar can add something to this thread as i believe he was promoting this product?

 

[bee]

Firsty Thank-you to everyone who has posted their comments and excel spreadsheets on Bills new product.
I was wondering if anyone has anything further to add or maybe any clients of Investors direct who just use them as their broker.
Thank-you in advance.
Bee.

 

[localinvestor]

hey there, went to Bills seminar on sunday and thought it was good but a little bit of a sales pitch!! As i am new to investing i went along with the impression that they would reveal 'best suburbs in melb to invest in' but all we got was a sales pitch (good info but left wanting)!! buy REIV updates, buy books, buy mentoships......today only save thousands$$$$$$$
hhmmm a little suspisious, can any1 refer me to a trustworthy morgage broker as i am a little suspisous of Investors direct! as i am not yet properly educated in the game i am very cautious with my money as there are plenty of people just waiting for an opertunity to take it off me!!
Thankyou to all of you who post honestly, i have found this forum to be invaluable!

 

[Ebbie]

hey there, went to Bills seminar on sunday and thought it was good but a little bit of a sales pitch!! As i am new to investing i went along with the impression that they would reveal 'best suburbs in melb to invest in' but all we got was a sales pitch (good info but left wanting)!! buy REIV updates, buy books, buy mentoships......today only save thousands$$$$$$$

I take it this was the "How To Accurately Pinpoint Where To Buy Your Next Investment Property In Any City Of Australia, By Using a Little Known Finance Strategy That Puts Cash In Your Pocket From Day One, Property Investment Seminar"?

Wasn't John Edwards from Residex presenting half of the day and Bill Zheng the other? I would have thought John Edwards would have revealed his pick of best suburbs to invest in etc.

From the Investors Direct website.....

Here’s Just a Sample Of The Topics John Covers On The Day…

Why are John’s predictions so powerful? Discover the Residex method of predicting property values and how you can use this information to build your own profitable portfolio.

5 Hottest, best performing suburbs in Australia. Please don’t be out of the room when John reveals these suburbs. See which suburbs will BOOM and how you can get in early and reap the rewards on offer.

See the history of the residential property market right before your eyes. Discover the lessons learned and begin to see the BIG picture that will transform your thinking, making you a more savvy and sophisticated investor almost instantly.

If John could only buy 3 average investment properties, where and what would he buy right now? Listen up and then take action when John reveals his top 3 picks… you don’t want to miss this piece of advice!

Why it doesn’t matter if interest rates rise or fall… going up or down you still make money.

John gives his short-term, medium-term and long-term predictions for the Australian property market. Not only will you be able to use this information right now and profit in the short-term, you’ll get the long-term predictions that make sure you build a sustainable and profitable investment portfolio for the future…. giving you peace of mind in this ever changing world.

John’s advice to new investors. Get the information needed to begin investing with confidence, certain you have covered your bases and you are making the right decisions.

John’s advice for experienced investors. John’s predictions will give you more stability as your portfolio grows and matures.

And loads more prediction, tips and insights much too sensitive to mention here!

 

[DavidMc]

If John could only buy 3 average investment properties, where and what would he buy right now? Listen up and then take action when John reveals his top 3 picks… you don’t want to miss this piece of advice!

Yes, what are these suburbs? Were these not mentioned?

 

[localinvestor]

not that i remember, and that was the whole reason i went!!

 

[DavidMc]

I've emailed Residex asking them. I'll post the response.

 

[DaleGG]

Hi

Sure. Talk to Rolf Schaefer. He is an all round good guy and very knowledgable.

Dale

hhmmm a little suspisious, can any1 refer me to a trustworthy morgage broker as i am a little suspisous of Investors direct! as i am not yet properly educated in the game i am very cautious with my money as there are plenty of people just waiting for an opertunity to take it off me!!
Thankyou to all of you who post honestly, i have found this forum to be invaluable!

 

[DavidMc]

David,

John asked me to reply to your email, he tells me that there were actually 5 areas that he had chosen and spoke about on Sunday.

If you would like some further information about these areas, you could email Ruby Janssen, her email address is [email protected].

Regards,

Barbara

Don't suppose you were in the toilet during this crucial part?

 

[Ebbie]

not that i remember

....or drunk? Just kidding.

 

[localinvestor]

ahh ok i do remember he showed a few examples of suburbs performance and asked us to choose 1 that we thought were good investments (the only 1 in melb he gave as an example was Fitzroy, so it must be 1 of the 5) but i dont remember him saying these are the top performers!