Which loan??

OK... so we are in the process of looking for a lender and beleive that Rams suit us due to 95% loans - as far as we know, no other lender will lend that much.
Now to the point of which product? Rams has over 15 loan products! This property will be out PPOR for a few years until we can move on and make it an IP. We'll be doing some basic reno (kitchen, bathroom, floor covering, paint etc... so we will need some extra cash for these things.
We were thinking IO (for tax advantages when it becomes an IP) and 100% offset (so we can try and save a little interest), but what other features would be ideal for our situation?
Also, we're really unsure about fixed or variable.
Brain strain!!!
 
Hi there happy,

There are 97% Loans still out there.

The product depends on your requirements. I don't know if you realise of not, but the product can also restrict your LVR? For example the IO Maximiser lends to 90% or 92% with Capitalised LMI?

You do realise that major banks offer packages that waive the Valuation and Application Fees? RAMS also have some hefty exit fees that the Majors do not. (Depending on your loan amount)

I would advise that you find yourself a good Mortgage Broker who can determine the best loan from ANY bank for your needs.

Regards Jo
 
This might be a branch / franshcise deal with the 95 %.

I understand that the full doc products are still available to 95 % through that channel...........maybe im late with my info ?

Branch also doesnt suffer the current 4 week service levels either :(

What Josko said is right though, have a good chat with a broker like Josko and see what other options you have, while RAMS isnt the bottom of the barrel, there are some much more flexible options and she will be able to advise.

ta
rolf
 
I know the RAMS branches were still doing them about 6 months ago. The clients I referred there all managed to fail for one reason or another though.

One client failed on the valuation. It came back at 420 instead of the purchase price of 450. Four weeks later he'd managed to save another 5% so I put it with ANZ where I've got a bit more control over the valuation.

The same valuer was appointed. She valued at the purchase price because this time the person ordering the valuation (me) was able to disclose the car park and didn't give her instructions to be very conservative.

Lenders, or more specifically the mortgage insurers, aren't really keen to do 95% lends even when their policy says they can.
 
Thanks for your responses. We've already spoken to 3 MB's and a rep from Rams. The MB's are telling us that they don't have any products that suit us i.e no more than 5% deposit, no genuine savings. I understand that the majors wont lend more than 90% - so we will have to go with Rams, even though the fees maybe higher. At this stage we just need to get into the market. We're mid 30's and want to get a start as soon as we can - and we've been wanting to do this for years.
However, if anyone knows of where we can get what we want with more flexible lenders, better fees etc., then let us know!! Thanks.
 
Despite my previous encouraging comments, there are some lenders still considering 95% loans with non genuine savings.

The are really hard to qualify for, but they do exist.
 
Something to be aware (as I have recently made this very painful discovery myself!) of are the tax implications of a redraw facility vs offset - offset is the one you want if you have plans to convert this property to an IP in the future. RAMS don't offer an offset as far as I am aware (they offer redraw). I looked at them recently for a loan but decided against this on that basis - i.e. no offset.
 
hi happy,:)

How much are you looking to borrow? What credit cards or Savings Accounts do you currently hold? If the questions are too personal, feel free to PM me.

It is difficult to advise when we don't have enough details.

In regards to your other question on Fixed Rates. That all depends on whether you would feel more comfortable knowing how much your repayments are and whether you would be happy paying for higher interest rates than you would currently be on.

This also depends on whether or not you feel interest rates are suddenly going to jump in the next few years.

No one knows and any advice as to when they will rise and by how much is only a guess. Maybe an educated guess...but nevertheless - a guess. You can bet your boots though, that they will rise. :eek:

The thing about rising interest rates is...it means our economy is doing well. It means unemployment is down. It means consumer confidence is back, sales figures are up and inflation is back so........housing prices are set to rise.

You should factor higher interest rates into your affordability. They are at record lows. What you can be happy about is the Capital Growth you are about to make on your PPOR.:D


Regards JO
 
The difference between an offset and a redraw? The Rams guy said they were the same - I guess he would say anything to sell the loan! My understanding is that the offset allows you to put your salary into the loan and then you take out what you want - may save you a little interest that way. A redraw allows you to pull out any extra funds that you have put into the loan ( on top of the minimum repayment) - so you could put your salary into the loan and then take it out again if you need it. Essentially the same? So, are there more fees with the redraw or the offset??
 
The difference between an offset and a redraw? The Rams guy said they were the same - I guess he would say anything to sell the loan! My understanding is that the offset allows you to put your salary into the loan and then you take out what you want - may save you a little interest that way. A redraw allows you to pull out any extra funds that you have put into the loan ( on top of the minimum repayment) - so you could put your salary into the loan and then take it out again if you need it. Essentially the same? So, are there more fees with the redraw or the offset??

Happy,

There are significant tax differences between a redraw facility and an offset account. As mentioned, if you have any plans to convert the PPOR into a IP in the future, you should get an offset account and put any "extra" repayments into the offset account.

Please understand this before you buy your first place - I didn't and am paying dearly for it now!

Regards,

Jason
 
The difference between an offset and a redraw? The Rams guy said they were the same - I guess he would say anything to sell the loan! My understanding is that the offset allows you to put your salary into the loan and then you take out what you want - may save you a little interest that way. A redraw allows you to pull out any extra funds that you have put into the loan ( on top of the minimum repayment) - so you could put your salary into the loan and then take it out again if you need it. Essentially the same? So, are there more fees with the redraw or the offset??

The biggest difference is for tax purposes.

Offset = Down the track you have kept you principle and interest payments separate therefore any offset account redraws will not compromise your tax deductible for Investment purposes = your accountant will be happy

redraw = You have paid down principle, so if you go to extract redraw amounts you have paid down the Loan amount and as far as the ATO is concerned interest payments are only tax dectuable on outstanding principle that has not been paid down = your accountant will hate you.

Speak to your accountant. On the safe side pick offset, but make sure it is a full offset account and not just partial offset.
 
Offset vs redraw - def not the same! Not a fee issue, a tax issue - everything you deposit via a redraw facility is deemed repayment of the original loan, so when you redraw that is considered a new loan for a new purpose, and ends up being non-deductible (unless used for investment purposes and traceable as such) - can be a major issue if looking to neg gear in the future... as I have discovered.
 
That's exactly the info I need - thanks guys (may take a while to sink in, but thanks!)

So with a redraw facility, even if it was an IO loan, you are saying that any extra that I've paid into the loan is off the principal, not the interest? And this somehow mucks up things for me when i convert the property to an IP later on down the track?

One MB even advised me to not do the IO thing at the moment - pay principle and interest until I'm ready to convert it to an IP - that way, if I change my mind and not want to convert it later, I will have not paid too much interest. No that Im going to change my mind... there's no way I can live in a tiny two bedder all my life!

This is so confusing - everyone gives you contradicting advice :confused:
 
And this somehow mucks up things for me when i convert the property to an IP later on down the track?

Even if the property is an IP, you can't claim interest on the portion you redraw (unless this money is used to buy another income producing instrument - eg. dividend paying shares, another IP etc)

You will NOT be able to use the redraw to buy your PPOR and still claim the tax deduction for that portion of interest.

Cheers,

The Y-man
 
There is no contradictory advice ..................in this case just plain WRONG advice, and its so common in regard of purpose of the use of the funds determining deductability that its laughable that this still isnt covered in basic lending training......................

ta
rolf
 
Congrats Happy

Hi Happy,

I remember few months back you were struggling to buy an IP with no savings in your account. You were also saying that it will take almost 2 yrs for you to save the required deposit with extra $350 pf you were able to save.
Do you want to share the story how did you get the deposit so quickly in 8 or 9 months (just to motivate others), if it is not too personal.

Thanks
Sanjay
 
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