Which loan?

[MelbEngineer]

Hi, I am getting ready to buy my first IP and need some advice on loans.

I saw that Ratebusters have fairly low interest rates (6.993%) but with application fees. Now I met with a mortgage broker whom has advised me that a loan with ING or CBA (rate around 7.4% with little or no application fees,) would be a better choice. The reason being that most people change there loan every four years, on average. Now my question is, why do people change their loans every few years and which loans can people recommend?

Justin

 

[alexlee]

The reason being that most people change there loan every four years, on average. Now my question is, why do people change their loans every few years and which loans can people recommend?

Justin

Investors usually refinance to free up equity to buy more properties, and/or renew the interest free period. If you do plan to invest in more property, you also have to look at things like whether a package waives future loan application fees, valuation fees, etc
Alex

 

[mortgageman]

As an investor, you would almost certainly be better off in the long run with a facility that provided you with some flexibility should you want to sell or draw on increased equity in the property. I'd take the ING option over the CBA product as there are no re-draw fees or establishment fees and lower break costs. Bankwest and Suncorp also have good basic loan products, although the service levels at both can be a little dubious.

Kind Regards,

Cameron Perry
Perry Financial Strategies

 

[MelbEngineer]

Thanks for the replies. I'll give you a little more information about my situation.
I plan to buy something with about a 5% deposit for say 220K. Then in say 2-3 years I will aim to buy another property using my equity in the first property and any money I have saved up.

So if for example I had 30K paid off a loan of 215K, and the property was worth 255K in two years time. I would have a 72.5% loan. I could then use some of the equity in the house to buy the second and I may or may not be charge fees on the first loan as well as the second. I think I am beginning to understand this all now. I just wasn't sure whether the advice my mortgage broker was telling me was reliable.

 

[alexlee]

With that sort of LVR you'll most likely be charged LMI (lenders Mortgage insurance). But the theory is sound: you'll have to keep an eye on the costs, though.
Alex

 

[Spectre]

As an investor, you would almost certainly be better off in the long run with a facility that provided you with some flexibility should you want to sell or draw on increased equity in the property. I'd take the ING option over the CBA product as there are no re-draw fees or establishment fees and lower break costs. Bankwest and Suncorp also have good basic loan products, although the service levels at both can be a little dubious.

Kind Regards,

Cameron Perry
Perry Financial Strategies
www.perryfinance.com

I dont know about that if you are comparing ING vs CBA and I'm the last person to beat the CBA drum but...

Considering the 3 year rate saver at cba, the rate is lower than ING for the 1st 3 years, the DEF is lower than ING until after 3 years, and the setups are less than ING as well... CBA is $100 vs INGs $220.

INGs strengths would be more in the ability to lend more against security at 97+3 (100% lending) where cba's 95+2 (97% max lend) & the redraw

So its going to depend on what you want as an investor.


Regards

Richard