What interest rate should I be paying ?

[landlubber]

What interest rate are you paying and how did you get it?
Direct with the lender? or via a broker?
Any tips?
Loans "significant". LVR abour 50% Cash flow "plenty".

 

[Kristine..]

Ahoy Landlubber

Well, your question is akin to the length of string.

Everyone's circumstances are different, are you talking about standard or discount loans, full doc, low doc, asset lends or whatever.

I often have people ring me and say 'We saw an advertisement in the paper today for x%, we'll have one of those loans, thanks' without understanding that the advertised rate is often the prime rate and they may not be prime candidates.

Even someone looking for a low LVR and who has 'plenty' of cash flow may not meet a particular lender's criteria, or that lender may not be appropriate for their circumstances.

If you would care to post a little more detail about your own circumstances but for example I personally hold loans ranging from 6.75% to 8.75% and all of the loans and rates were taken at different times and in different circumstances eg commercial security asset lend is obviously not going to compare with residential lends with full PAYG documentation.

cheers

Kristine

 

[Simon]

As Kristine said there is no standard fit but in your case I would be aiming at something under 7%.

Cheers,

 

[Rolf Latham]

Hi LL

Id have to echo the sentiment so far.

perhaps more so on the diemnsions youve provided.

Significant to one borrower is 400, to another its 3 million. That tends to make a difference on what sort of rate is achievable.

ta

rolf

 

[landlubber]

Thanks for responses....
In this case significant means "several million".
Properties all residential (houses,apts, small blocks units).
LVR around 50% or better.
Cash flow WELL in excess of liabilities.
Employment secure, same for 20 years.
Only want lowest variable loans, interest only....no P&I.
Full documentation available. Complete, statements, tax returns etc etc
Currently being offered around 6.5% at the moment. (discount to standard variable).

LL

 

[lizzie]

unless you can find a source outside normal lending then you have to look at underlying reserve bank rate - banks still need to make a profit/markup. 6.5% seems pretty good but also take into account any fees.

 

[Kristine..]

Ahoy there!

Well, probably around that level would be about right, but you mention a range of different types of securities and that can have a bearing on the deal, too.

For 'real deals' it is amazing what a good BDM can do for a broker's customer or Relationship Manager can do for a branch customer.

Landlubber, it's all 'in the deal', and if you are looking at a mass refinance rather than a spot refinance then you are looking at customised finance rather than off-the-shelf loans.

For a custom fit you should be able to negotiate a smaller margin over the cash rate. But for general purpose loans, yes, there's not much below 6.57% even for bulk buying.

Cheers

Kristine

 

[Rolf Latham]

Hiya

With such low apparent risk you have a good bargaining chip. The rate you have is good.

Homepath will take on some of your portfolio no doubt at 6.40

Over 1.2 mill you could get an effective variable rate of 6.45 with any of the majors with a some haggling though/with a good broker. Doesnt make a lot of sense from a risk point of view, though putting all your business with the one lender ?

Obviously, you feel that the 5 year trend for rate is flat to down ?

You could do an effective rate of around 6.65 fixed for 5 years ?

ta

rolf

 

[IanF]

Must disagree here with Rolf re Homepath. Sorry Rolf!!

I'd suggest Homepath only for "mum and dad" loans not investors. They are far too rigid and far too painful to deal with anything thats slightly outside the square. They only have phone support and thats pretty appalling.

Homepath also cancel unconditional contracts as I've found to my cost.

As someone who used to madly chase lowest rates, I've found its worth paying slightly more (after all interest is tax deductable) for flexibility.

There are quite a few "professional packages" out there round about the 6.7% rate which should be pretty easy to get.

Good luck

Ian

 

[Rolf Latham]

Hiya Ian

I dont think you are disagreeing with me at all :O)

Thanks for re-raising that point.

I think everyone here knows my dislike of certain lenders for certain reasons.

Recently in another post I said I was reminded that any product or service has 3 things.

Price
Service
Quality

Choose any two :O), for price doesnt mean "value", even with a commodity product like mortgages.

Often its possible to get some sort of balance of the 3, with certain lenders you get one.................... PRICE.



ta
rolf

 

[landlubber]

Thank you everybody, this forum is a fantastic resource.
To round up & respond to the various points...
Rolf, the business is currently spread between NAB, CBA & Suncorp. We're totally fed up with Suncorp (poor communication, rates too high etc.) so that is the portion that I described and looking to shift. Yes, it's a "bulk" deal as I described.
From what I hear if we can get near to 6.4%, then that's looking like a deal.
Having been caught once with fixed loans and having to pay a significant break fee, we keep away from them due to their total inflexibility.
Thanks very much.
LL

 

[Rolf Latham]

Hiya LL

One thing you can look at with fixed rates is someone like Heritage wehere they dont mind paying off as much as you want, and being able to redraw the $.

Im not normally one on fixed rates much, especially in your case your level of $ exposure is high but it sounds like your LVR and relative cashflow exposure to you debt is manageable. Recent chat by Peter Spann has got me thinking more about rate risk management again.

Some of our clients use a "low" rate LOC or 100 % IO offset variable loan and a product like the Heritage loan, and the use that as an interest rate hedge. moving money around as rates move. This works very weel for those with lots of equity.

ta
rolf