Silly Decision Three Years Ago. Cut Losses?

[joanmc]

+1 for what evand said.
This is not the end of the world. My only bit of advice would be about those 6000 tax returns- if you keep this property maybe put them into it so that they help you to build up the equity or at least into an offset account. then at least you can refinance to a better product much quicker.
Three years ago the assumption would have been that the property would grow 10% per year and that after the 3 years you would have heaps of equity, unfortunately property has been a bit flat so that didn't work for you.
If a broker can't find you a better deal maybe if you keep paying what you have been, after they give you the slightly lower rate, at least you will be building 3k per year.
Good on you for taking action, asking questions and being prepared to learn.

 

[Gremlin]

We also had to pay 1% on top of this to make up for mortgage insurance.

My guess is that this is the cause of your concerns. Effectively you've capitalised the cost of LMI into the interest rate and you haven't yet (fully) paid for that LMI. You still need LMI with them (as you can't refi to below 80%) unless you pay out the loan. If you refi elsewhere you'll still need to pay for LMI.

Switching to a lower rate that doesn't include the LMI interest rate adjustment is like asking the bank to waive part of your loan.

 

[wally]

If you see the potential for capital growth in the future and you would like to live in this particular place down the track.
Then refinance with someone else after the fixed period is up.
Plenty will do 95% LVR, and depending on valuation you might not have to add any extra money, otherwise you can look at adding some cash to get you the 5% equity.

 

[S83]

I have contacted the Ombudsmen to let them know about the situation (I am aware that I need to try and sort it out with St. George first), I just wanted their advice as to whether this is worth pursuing or not.

They said absolutely.

I've also had a brief chat with my solicitor regarding the loan.

To those people saying that lending conditions have changed since the GFC, you got me curious!

So, I phoned St. George to ask about their LVR policy. She asked if I was an existing customer, and I said yes. AND, Surprise, surprise....

"We loan up to 95% of property value". NOT 80%.

This just makes me so mad, and takes up so much time!

I've sent a strongly worded complaint to St. George who apparently have made the case a "priority" and have assured me that it's "not on" for a CSR to advise me to go elsewhere.

I also sent the same complaint to the Mortgage Broker that signed us up to this loan. He said we will crunch some numbers and call me later today.

I don't want to sell...I will fight tooth and nail to avoid it.

 

[lizzie]

They need the advice of a good broker.

and that good broker is rolf latham (as above).

he won't promote himself - but i will. email him, or phone, and get some definitive idea of what you "can" do.

the rest is speculating. and you don't want to go vendor finance/wrap if you are wanting to move back in. vendor finance is basically like a hire/purchase agreement - the buyer pays you "hire" at a predetermined buy amount until they are ready to refinance themselves to "purchase" at that predetermined amount.

i have done several in the past, and made okay money with the cashflow, but could've made better if i'd held them as rentals and reaped the growth in equity myself.

 

[Nth Brisbanite]

Increase in value of your property

Has the property gone up since you bought it? All your calculations assume that it hasn't. If it's in such a good location, as suggested in one of your posts, surely it must have increased in the 3 years since buying it.

According to your figures, your equity is 5%. That can't be right as prices in most places in Oz have increased quite a bit since 2007/2008.

One of your starting points must be a valuation.

 

[Marty McDonald]

Thats a tough one. Its the old no deposit loan that was not underwritten by mortgage insurers it was self insured by paying an additional 1% on the ongoing rate so to get out of it basically you would have to have at least 10% equity and refinance and cop the mortagage insurance fee. (possibly 5% equity with one or two second tier lenders but that might be like going from the boiling pot into the fire or whatever that saying is as insurance fee and rates might not make it worth it).

Definately wait till the 3 years is up and then explore other lenders options. IMO St.George should also be able to do 90% not the 80% that you have quoted but would be considered a brand new proposal so you would have to pay the mortgage insurance fee regardless.

One other suggestion...could you get a family memeber to put up additional security / and go guarantor to get to you the 80% LVR and then wait a few years and discharge them?

Hope it works out

 

[Brett IP]

Can you somehow get a loan through another bank, once the fixed period ends and borrow 90%, paying LMI, but making up for this on a much better rate?.

You could use the current equity at that time, save as much as possible till then & even sell a car or get a private loan if need be to make up the 10%.

Id look at a few avenues before selling the house, youll end up in the red in that instance (Bank Fees, Selling costs etc)

Thats my 2c

 

[DCP]

Hi again,

Based on your figures you have about 5% equity in the property,

If you borrowed $337,000 for the property and your payout figure is $328,139then you have $8,861 in equity.

If you paid 337,000 for the property and it is now valued at $345,000 you have another $8,000 in equity here.

You wont know for sure until itil is valued.

It sounds like you have made up your mind and want the property, so all thats left to do is draw up an action plan about what you want from your next mortgage. Write it down.

a) variable rate or fixed
b) 95% LVR
c) redraw facility or basic loan
d) credit card or offset account attached
e) are you going to offer other security to get your LVR down
f) application and valuation fees
g) mortgage insurance

You know you can get a new loan in Feb so you have plenty of time to shop.
You need to find out what questions you need to ask then go out an get a loan that offers you the best deal, You have to know what you want and drive the process. Ask for the best deal.
If you dont believe what you are being told double check, ring back an ask them again. If you push they will respond as you have found out, if you ask it will get done on their time.

Good luck.

 

[The Y-man]

PLEASE don't tell me about what a bad decision we made three years ago, believe me, I know this.

I'm with the others regarding this statement - "what bad decision?".

You made a choice based on the best informaiton you had at the time. It was the right decision at the time with risks (as any decision has) - and it just so happened the risks came true. As long as you understood the risks at the time, it was the right decision.

The Y-man

 

[sash]

Sarah,

When you come off your fixed rate...most banks will offer you the options to move to another fixed rate (usually no fees) or go variable.

It is unlikely that you will need to pay the 8+ plus rate.

Due you own due diligence but see if it is worth getting a loan now (with St George) fixed for 1 year at 7 something...with a view to changing over to this rate in Feb.

I have no idea what vendor finance is. Lol. Will look in to it!

We'd prefer NOT to sell, as my partner wants to move back there one day (it's in his dream location), but if that's what needs to happen, I guess that's what needs to happen.

I've been reluctant to see a mortgage broker because we were convinced to fix our rate, which has been an endless source of frustration, but we might need to do that too

DCP:

I'm not sure about the value of the property. It's a townhouse in a small complex of 10. We were happy when, 4 months ago, the identical townhouse two doors down was put on the market for $395,000.

However...it's still on the market, and price has dropped to $349,000. I'm gonna say my estimate would be $340k-$345k based on this. Meaning around....$3000 - $8000 in equity. Not much at all.

You say that the 20% equity thing may not be in the contract, and may only be placed because of the GFC...but if they lend NEW customers more than 80% of the property value, do they have the right to decline existing customers the same courtesy? That would be unfair Will have to call them again to double check.

 

[the_captain]

As others have said, you should just roll off onto standard variable and then go and see Rolf. As lizzie said, he wont promote himself, most of his business is word of mouth. He is great to deal with and held my hand through my first investing disaster. Since then, I have gone from strength to strength, with Rolf as a core part of my investing team.

Don't worry about physical location. I've never actually had the pleasure of meeting Rolf in the flesh and most of my loans have been closed when I was working overseas on business.

 

[evand]

My previous post in this thread:

I think you could do worse than having a chat with Rolf on the forum here.

Hes a mortgage broker on the GC. And a very good one.

and that good broker is rolf latham (as above).

he won't promote himself - but i will. email him, or phone, and get some definitive idea of what you "can" do.

 

[Ausprop]

gees you better call Rolf! if you don't, I will for you

 

[silversands]

Guys, you're gonna make Rolf blush!

 

[RightValue]

I'm with the others regarding this statement - "what bad decision?".

You made a choice based on the best informaiton you had at the time. It was the right decision at the time with risks (as any decision has) - and it just so happened the risks came true. As long as you understood the risks at the time, it was the right decision.

The Y-man

For what it's worth I agree with everything Y-man said.

I know some savy investors that have made some investment decisions that look great at the time but come back to bite them late.. think Tea Tree schemes .. even accountants got burned on that one.

When you invest you do not know the future. If the Brissie market had been as hot as the Melbourne market over that period you would be laughing. Investors in many properties in Melbourne have been very lucky IMHO over the past couple of years.. it could easily have gone the other way.

good luck and don't let this put you off, think of it as a learning experience.

cheers

RightValue

 

[Ausprop]

I plead guilty your honour... i signed up to macbanks lovely cap gauranteed structured products, delightful things like multistrategy 2 and the later formed violation fund. what utter duds. I should have called a plumber around to rip out my plumbing and relay it all - would have achieved the same result (nothing) and got a lovely tax deduction

 

[Alabex]

My previous post in this thread:

I think you could do worse than having a chat with Rolf on the forum here.

Hes a mortgage broker on the GC. And a very good one.

I am not in the area, or refinancing.. but after reading this thread l feel maybe i should call Rolf...