Refinance or Not

Hi guys,

I am a newbie at somersoft forum and so thrilled to see so many people sharing their knowledge, experience and motivation here.

I have always been interested in properties and at this stage have two properties; one is PPOR and second one is IP in Brisbane


I have a few questions and can’t seem to figure them out on my own. So I would appreciate your suggestions

Given that interest rates so low I am contemplating to refinance my loans. To give you an idea about my situation, here are the figures


Question 1


PPOR
Loan Amount $400,000 from ANZ
Recent valuation $475,000
Remaining loan amount is $390,000
Breaking Cost $9000


Fixed portion is $250,000 and variable is $140,000; the average IR is about 7%

So the question is, I am not sure whether I should refinance my home loan or not AND if I should what is the better option total fixed or total variable? I am not sure if I am going to keep this property for long time as we want to buy a bigger house or rather sell this one and buy another property with better prospects for future (for CG or with LMR status) !!

Question 2

IP
Loan Amount $430,000 from ANZ
Expected valuation $475,000
Remaining loan amount is $418,000
Breaking Cost $13,000
Fixed for another 2 years at 8.39%

We are currently getting $560 rent per week so if we fix it at 7.1% or 7.2%, the property becomes almost neutral gear for 5 years (but it is effective only if we fix it for 5 years, otherwise the breaking cost is too much and will neutralize the low IR). So should we fixed it or make it variable and hope the interest rates don’t go high in the next 3-4 years !! What is your opinion

Question 3

What do think about cross-collateralising these properties (as we are in negotiating with NAB and the guy was pushing for it). Also, we just got an email from the NAB guy and he won’t tell us the valuation we got for the properties. He is giving us the amount for the LMI and saying that he can’t disclose the valuation, as we didn’t pay for it so the bank reserves the right not to tell us the valuations.
Is it normal or I am getting my BP high for no reason. I have never heard such thing!! Has anyone dealt with NAB before, they look very doggy and unfriendly to me?

Question 4

Can anyone recommend any good broker they have dealt with in the past who is effective in getting good deals and is professional in his conduct? We will be investing heavily in Real Estate in near future so would like to form a good team to do things efficiently.

I know I have asked a lot o questions But I do hope to get replies as I need some second opinions from people who have/are dealing in the same situation.

If there is any info I have missed to mention plz let me know.

Thanks in advance.

Cheers
Micky
 
Hiya

Few things that might need consideration.

Why move from the ANZ isn the first place ?

Are you sure you want to break those mid range fixed rates in an environment where variable rates may soon again increase ?

Cross coll, unless it benefits you, why do it, the lender gets more control and you get little. Seeing NAB is also asking for LMI, run ............dont walk.

NAB direct does have benefits, A lot of their vals are "generous" to get you in the door, and much less generous when you are looking to break up xcoll or pull some equity. product wise they are ok, but can be very conservative.

Without some soft data and trying to asceratin yor risk profile its not possible to see if you should go variable fixed or otherwise.

On the vals, it would take a little calc to work out what your vals were from the LMI premium.

ta
rolf
 
Youre in LMI with ANZ or NAB based on what you've said. If you've already paid it at ANZ then they can use your previous LMI which brings your costs down versus paying a whole new premium with NAB.

If you increase borrowings on both variables to 90% it gives you about 30k to play with (roughly).

Tough to find IP2 with a 30k deposit once legals etc come into it unless you have some extra $ to throw in.

i.e. buy a place for 300k, you need 30k for 10% + legals/govt @10k - so you need $40k to get in.

Unless you have a good quality 4 star broker who can still get 95% at another lender as anz wont do it.
 
I agree with the guys I am unsure why you would want to jump out and refi away from Anz especially with those breakcosts, the LMI costs and the train of thought that you might sell one of the properties shortly.

Also i have never had a problem in obtaining the actual val figure for any client from NAB although as Rolf mentioned whilst you could work backwards from the LMI figure, calculate the LVR and then figure out the valuation.

You bet the NAB want to cross the 2 loans for you nice bit of extra security for them. Again we make sure any loan we do through NAB is certainly uncrossed. Bit more work for the Credit guy but that is a condition of giving them the deal.

Personally and without further info this is not full advice I would be staying put and if you need to go again go 95% LVR on a standalone deal down the track pay the LMI then.
 
Thanks a lot guys for your quick replies.

Just some quick replies…
“I agree with the guys I am unsure why you would want to jump out and refi away from ANZ especially with those breakcosts, the LMI costs and the train of thought that you might sell one of the properties shortly.”

Ok the situation is there are three scenarios with the PPOR.

A. We can move out, buy a new home according to our requirements OR shift to new place with less monthly payments and make this property as an investment one and probably have to pay 400-500 per month for the monthly instalments which is we are comfortable with at this stage. Meanwhile we can buy a new property and use the money saved from paying less instalments from this property for the instalments for the new one.

B. We can keep it like as it is and do some minor renovations and sell it within 1 year. The reason for this is in Government has approved to build public housing in the next suburb and we are afraid that it might affect the prices in our suburb. Plus we don’t think there will be any exceptional increase in the prices in this suburb (Carseldine) other that the normal growth with regards to the inflation n all. So if we sell it we will have more borrowing capacity and buy better property with long term CG I mind or a property where I can start my home business (dental clinic). Do having public housing next door affect prices ?? your COMMENTS PLZ !!

C. We can keep living in the same house for few years and refinance the loan and get better rate for the long term.

Also i have never had a problem in obtaining the actual val figure for any client from NAB although as Rolf mentioned whilst you could work backwards from the LMI figure, calculate the LVR and then figure out the valuation.”

The LMI amount is almost $14,000 but this is for the whole amount for both properties so we don’t know how much each property is valued at. The $475,000, which I mentioned, was given to us by ANZ a few months back. So I am not sure how to figure out for individual valuation for each property.


“Personally and without further info this is not full advice I would be staying put and if you need to go again go 95% LVR on a standalone deal down the track pay the LMI then.

I do agree with you and I want to push for the same as that way we will have some equity free which can be used for further projects as we are quite tight on the saving front and in future looks like it will be hard to do some savings !!

Youre in LMI with ANZ or NAB based on what you've said

We didn’t paid the LMI to ANZ as we got the professional package !!


“A lot of their vals are "generous" to get you in the door, and much less generous when you are looking to break up xcoll or pull some equity”


I am very much worried about the same as we need some bank who is flexiable to support us in our future projects and have lenient approach. But can’t see any other option as NAB rates are the cheapest one at this stage or may be HSBC the next one (to the best of my knowledge).
Do u know any other place I should look for !!??


Also something I would like you guys to share your knowledge about !!

The person we are dealing with from NAB actually works for NAB (not a broker). He goes he gets salary from NAB and doesn’t get commission. I am not sure about that !! Do they get performance bonuses or something similar or they completely work for salary only!!?? Also he is pushing us to get independent valuation from NAB certified valuators !! I don’t mind spending some money but if it is going to be the same result then what is the point !! any quick tips to get a better valuations or should we get it done in the first place ??

In the end I want to thanks you guys again for the quick replies as your comments are on the same train of thoughts as mine and it is good to hear different angle and opinion.
 
Last edited:
Smick

Couple of responses:

We didn’t paid the LMI to ANZ as we got the professional package The Breakfree package doesnt make you exempt from LMI unless you are in a Medical related Profession and then only on your PPOR.

The person we are dealing with from NAB actually works for NAB (not a broker). He goes he gets salary from NAB and doesn’t get commission.
Wanna Bet. Just means he doesnt have to disclose this to you.

Also he is pushing us to get independent valuation from NAB certified valuators !! I don’t mind spending some money but if it is going to be the same result then what is the point !! any quick tips to get a better valuations or should we get it done in the first place ??

To be honest this is concerning as normally only the course of action you would take if the vals where to your liking. Go back to Anz they will do if for nothing for you under your Professional package or at least 3 a year.
 
Hiya

This is possible counterproductive thinking for you middle to long term.


I am very much worried about the same as we need some bank who is flexiable to support us in our future projects and have lenient approach. But can’t see any other option as NAB rates are the cheapest one at this stage or may be HSBC the next one (to the best of my knowledge).


You can choose flexibility or price. Working mainly off price is like driving a car using the rear vision mirror, you end up with a limited view, and will possibly prang the car.

A couple of bits of free comment :)

1. Dont get stuck on price point for trying to choose a mortgage product.
2. Dont place all your lending with ONE lender
3. Dont expect the one lender to fill all your needs
4. Work out your middle to long term borrowing goals and work your loan structures and lenders needs backwards from there. This makes "sure" you use the right lender at the right part of your investing career.

ta
rolf



ta
rolf
 
Nab rates may be cheap today but tomorrow is also another story.

Me, I'm ex cba. we got bonuses as well as trail income working as a branch lender back in the day. So I'm pretty sure that NAB dont pay lenders just a base wage, based on when they wanted me for a job with them they offered me a similar deal with bonuses etc as well

how much available cash will you have if you do refi to nab. From the sounds of it, you're paying 9k+13k in break costs, plus another 14k in LMI - totalling 36k (plus release fees from anz, govt reregistration fees). so you pay 36-39k to get @30k cash to 'do something' which might not even fly in the current environment to begin with...?

Or am I missing something - from memory nab can only do a 90% refi to begin with... same as anz. Or you stay with anz and dont pay 36k and get 30k.

Also if its in the new area of Carseldine and a new 4bedder then many of those are coming in over 500 on val. Point being - the nab vals may be short hence their wanting you to do another val as they probably used their internal guy to value them.

Now I had a NAB bank guy value a place in bridgeman downs fand it was short by about 60k on owners estimates until we gave him further evidence which he was too slack to get initially. So, if it was the bank guy valuing it not a licenced valuer and its under your estimate, the reason the nab loansie suggested that is then he can use the higher of the figures or get the valuation reassessed. Its also weird, I can order a val for nab (homeside side) upfront at no cost to the client so why hes asking you to order one... shows they're having issues there somewhere.

In the meantime its more LMI costs for the borrower and restricted funds to be lent.

I do like nab as well, think they're ok to deal with, but they run hot and hold depending on the day same as any other lender.

If its the housing area I'm thinking of - the stuff running @$250k-ish... thats the govt sponsored stuff... its sold out faster than you could blink and theres a waiting list on it. Heaps of investors in it for obvious reasons... 250k with @300 pw returns from memory.
 
All I'm seeing here is that moving to the NAB will cost you quite a bit of money and won't really give you any benefit you can't get through ANZ with a bit of effort.

Both Rolf Latham and Richard Taylor are up your way. Please give one of them a call, it will be well worth it.
 
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