Rate question

Hi all,
Long time reader, 1st (hopefully out of many) post.
First of all, thanks all for the awesome knowledge you are sharing, it is invaluable.

After recently getting my PPOR sorted, I am now looking for IP #1 and planning for IP#2 in a few months.
Been shopping around for rates, and right now looking at Macquarie basic home loan that they offered me for 4.49% for up to 85% LVR, LMI cap if needed, upfront fees of $363 and no monthly fees.

Does this sounds reasonable? I actually thought rates would be a bit lower.

I currently have my PPOR with NAB and thought of going with them, but they are using a ridiculous rate for additional loans against new IPs if you already have a loan with them (7.5% I think, instead of actual). Understand other banks are doing the same?

Was also thinking of going down the loans.com.au path, but not yet comfortable of doing this without a broker.

Ta,
Mancha
 
Hiya

Welcome aboard :)

Focus on structure over rate.

Mac is a lender usually used later on in the acquisition stage due to their good servicing calculator.

Cheers

Jamie
 
Thanks Jamie,

Structure would be as follows:
PPOR Loan + offset - NAB
General investment loan (buffer, IP expenses, etc.) + offset - NAB
IP1 deposit + setup costs - NAB
IP2 deposit + setup costs - NAB

Total of 80% LVR on PPOR from NAB

IP1 80% other lender
IP2 80% other lender

Plan is to use the general investment loan to receive all income and cover all expenses of IPs.

Does this structure make sense?

If Mac should be left for a later stage, what lenders are recommended for the beginning?
Is around 4.5% the rate that I should expect?
 
Yep, if you want to build a decent portfolio I'd recommend not DIYing, and also not focusing too much on rate - using NAB or Macquarie too early will most likely use up your borrowing power and stop you short.

If you have an idea about what you want to do for the next few purchases, a good broker will be able to work out the best way forward for you to make sure you can still service down the track.

And yes, that structure makes sense. :)
 
Yep, if you want to build a decent portfolio I'd recommend not DIYing, and also not focusing too much on rate - using NAB or Macquarie too early will most likely use up your borrowing power and stop you short.

If you have an idea about what you want to do for the next few purchases, a good broker will be able to work out the best way forward for you to make sure you can still service down the track.

Agree re DYI, and actually using a broker. He first offered NAB and he was a bit surprised at the rate they are using, and he's now offering Mac.
He was also a bit surprised when I told him I want to use my existing investment loan as a buffer, isn't that a common strategy?
Although he was recommended to me, I feel that he's needs to lift his game a bit. But he draws pretty pictures though ;)
 
if your looking to go for 3-5 more properties ( without your income increasing) you will probably need to eventually rely on NAB and macq...so i would either refinacne out of NAB now or stop using nab for future lending.


A decent lender for your first few loans ( till you run out of servicing) is CBA/Westpac/ANZ/ St George ( make sure your loans are not crossed)

Focus on
- Structure
- Strategy
- Planning ahead

Rate is ALWAYS negotiable...
 
Other things to consider is paying LMI, sounds like you want to build a large portfolio so you really need to leverage this.

Also speak specific taxation advice but i think you may be able to structure this better.
 
Hmm in terms of structuring, don't go to Macquarie. I really like to 'keep them up my sleeve' until I need them for any serious investor. They get my clients who have large portfolios out of trouble when they don't have many other places to turn. Keep them till later.

In terms of structure, you seem to have set it up correct. I don't particularly like NAB being used so early, but probably no need to refinance out as there are 6 other lenders that I know of that take debts at actuals.

If you're focussed on rate, go to the online cheapies. If you plan on becoming a serious investor (multiple properties), its likely you'll need to engage in the services of a broker soon enough. That can be done down the track if your medium term goal is to buy your next investment and sit on the sidelines for the next few years. If that's the case, perhaps look at the online cheapies for rates. Pretty sure FirstMac take debts at actuals, maybe loans.com.au does too.

Cheers,
Redom
 
Other things to consider is paying LMI, sounds like you want to build a large portfolio so you really need to leverage this.

Also speak specific taxation advice but i think you may be able to structure this better.

Thanks, LMI is something I am considering.
Without going into specific advice, how do you think I can structure this better? I'm pretty new to the whole structuring world, so would love some more tips.


In terms of structure, you seem to have set it up correct. I don't particularly like NAB being used so early, but probably no need to refinance out as there are 6 other lenders that I know of that take debts at actuals.
Thanks Redom, always appreciate your comments.

I've just financed my PPOR with NAB a few months ago, so I'm not keen on refinancing out. However, do you think it's better I take the deposit loan/s with someone else or max ppor to 80% with NAB?

If you're focussed on rate, go to the online cheapies. If you plan on becoming a serious investor (multiple properties), its likely you'll need to engage in the services of a broker soon enough. That can be done down the track if your medium term goal is to buy your next investment and sit on the sidelines for the next few years. If that's the case, perhaps look at the online cheapies for rates. Pretty sure FirstMac take debts at actuals, maybe loans.com.au does too.
I'm definitely not in for one IP but am looking at developing a multiple IP portfolio, and believe that I'll always use the services of a broker.
I just have a feeling that my current broker doesn't really understand planning an structuring and just goes for the easy lender.
I've got a strategic view and am looking at property investment as a marathon, obviously would want a broker that shares the same view.
 
Servicing permitting, you should be taking a few steps down the serviceability chain. NAB/Macquarie etc are late game for investment borrowings, so I'd hazard a guess that your current broker isn't taking a strategic view with regards to your borrowings - especially if he didn't realise NAB's servicing rate for existing debt.

Make sure everyone on your team knows what they're doing, to achieve the best results. ;)
 
Again seek specific tax advice but you mentioned using an investment loan to pay expenses and recieve payments?
There is another thread on this but others use a LOC instead to pay all expenses including the interest on IP. Rental payments recieved are then paid into non deductible debt (PPOR).

This however is a fairly complex strategy and may require a private ruling from the ATO from what I have read.

Terry, Paul or Rixter best to speak to if you want to understand this more.
 
Again seek specific tax advice but you mentioned using an investment loan to pay expenses and recieve payments?
There is another thread on this but others use a LOC instead to pay all expenses including the interest on IP. Rental payments recieved are then paid into non deductible debt (PPOR).
Thanks, will look into putting the income into my ppor loan. Good way to lower non deductible and increase equity in ppor.
Is there any advantage of using a loc over a standard IO loan with offset? Looked around SS and Google, but didn't find specifics of why loc is better.
 
It removes a transaction between loan and end purpose, so makes it easier to connect the funds to use. It can be argued that putting loan funds in an offset does not equate to Investment purposes. This is a bit of a grey area though, depends which tax advisor you talk to.

Ie -

Loc - ip expense

Vs

Loan - offset - ip expense.
 
Been shopping around for rates, and right now looking at Macquarie basic home loan that they offered me for 4.49% for up to 85% LVR, LMI cap if needed, upfront fees of $363 and no monthly fees.

Does this sounds reasonable? I actually thought rates would be a bit lower.

^ Without knowing your long term plans and financial capacity ....you may or may not want to consider a 85% No LMi lender such as citibank or the rocks etc..

Save $3-5k on LMI....def better than any "low rate savings" ....and simply refinance out after 1-2 years to a low 80% LVR if you need to.
 
Assume for a minute my reponse isnt directed at you Mancha, and it isnt specifically, because I know zip of your rescoures needs and aspirations,but I get this scenario EVERY day, so its very normal........

first thing I would do is as advised already and look to hop out of NAB, UNLESS there is a specific structure reason as to why you are there.

Im going to as hard on you as I would be with one of my clients, perhaps either your broker hasnt asked for, or understood your goals, or you havent communicated /connected them properly to him or her. Do YOU know what your end game is ? I find thats a great place to start, because if you dont know...........you will be led by someone that has their goals for you, and that often not the right thing for your family.

As to not wanting to refinance out from NAB, fully understand that this would be inconvenient, and there is a financial price for doing so.

But what is the price of leaving it as it is currently....................?

Assuming its wrong for your circumstances ( and it may very will not be), further deepening the complications by taking on more poorly structured debt, making a downgrade move from NAB even harder makes little sense.

As for Macq, refinance for cash out is generally limited to 500 k max lend and 85 % LVR using their in house process with their mortgage insurer. Above that the deal needs to go to Genworth ................. and that is best avoided for a number of reasons.

In closing, if the first floor of a 2 story place has bad framing, but might be ok, does one fix it, or does one build the second story regardless.


ta
rolf
 
^ Without knowing your long term plans and financial capacity ....you may or may not want to consider a 85% No LMi lender such as citibank or the rocks etc..

Save $3-5k on LMI....def better than any "low rate savings" ....and simply refinance out after 1-2 years to a low 80% LVR if you need to.
Thanks, I'll look into the suggested lenders. If I can take out 85% without LMI, that would be great.

Assume for a minute my reponse isnt directed at you Mancha, and it isnt specifically, because I know zip of your rescoures needs and aspirations,but I get this scenario EVERY day, so its very normal........
Rolf, always appreciate your view, so thanks for responding.


Im going to as hard on you as I would be with one of my clients, perhaps either your broker hasnt asked for, or understood your goals, or you havent communicated /connected them properly to him or her. Do YOU know what your end game is ? I find thats a great place to start, because if you dont know...........you will be led by someone that has their goals for you, and that often not the right thing for your family.
Words to live by... yes, I do have a good grasp on my long and medium term goals and had a good discussions about them with my "team" (financial advisor, buyer's agent, broker and accountant, will pile on a lawyer soon).
I also make sure to reiterate my agenda many times to the team so that they will not forget my "true north", i.e. what I am trying to achieve.


As to not wanting to refinance out from NAB, fully understand that this would be inconvenient, and there is a financial price for doing so.

But what is the price of leaving it as it is currently....................?

Assuming its wrong for your circumstances ( and it may very will not be), further deepening the complications by taking on more poorly structured debt, making a downgrade move from NAB even harder makes little sense.

Yes, but is it vital to finance out of NAB at this stage? If I move forward with another lender and hit my first target (3 IP in 24-28 months), can I then refinance out of NAB? I'm also assuming my PPOR will go up in value in the next 2 years so will want to get some of that equity.
 
Yes, but is it vital to finance out of NAB at this stage? If I move forward with another lender and hit my first target (3 IP in 24-28 months), can I then refinance out of NAB? I'm also assuming my PPOR will go up in value in the next 2 years so will want to get some of that equity.

Thats a very important question that your broker can answer for you.

Assuming vals are similar, then serviceability may stop you from IP 1............

Id suggest its important to find out, but only if you want to maximise your resources.

if you want 2 or 3 ips,and thats all you need, and you can do so without moving, its not critical that you move.

I just know what happens to people once the inertia of the unkown is gone, the portfolio needs to grow much more quickly than they ever anticipated ................... and its then damn hard to rebuld the structure to suit the new aggressive mode.

ta
rolf
 
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