Who is offering the lowest SVR ?

[aussieB]

Which bank is offering the lowest SVR rate with 90% LVR and I/O (loan ~$430k) ?

My specific question : I have an unconditional loan from CUA fixed for 3 years at 4.84 I/O, with 100% offset. I am yet to settle on my PPOR and I am beginning to think fixed for 3 years is not a good idea. If I walk way from this, what sort of penalties would I pay, if any ?

Looking at past trends, looks like fixed rates are most of the times an indicator of what the variable rates will be. So I am thinking I will go variable now and fix it down the track.

It will be an extra hit on my credit file but I wont be able to purchase my first IP untill mid/late 2016 with my current plans anyway (and no other purchases requiring credit inquiry), so I guess this extra hit wont make a difference. Till date I have only three queries (I hope) Toyota, NAB and CUA.

My broker is just tired of me asking him all these questions and making him change my loan application a few times. I am just learning along the way and want the best in my interest.

 

[D.T.]

Is lowest rate really your top criteria? I dont think its in my top 5 or 6

Do you plan to have more properties or are you happy with the amount you have?

If you want more properties, you have to trust your brokers path that he's mapped out for you. If you don't, find another.

 

[Peter_Tersteeg]

It's not the right question to ask...

Many smaller lenders like to compare their SVR to the big banks and show tables that demonstrate that their own SVR is substantially lower. What they don't say is that almost all lenders use the SVR as a reference point and they offer discounts below this.

In this example the CUA 3 year fixed rate has been quoted asking for a comparison to other lenders SVR. The CUA SVR is currently 5.40%. It's not a fair comparison from the start.

CUAs fixed rates are comparible to other lenders right now, but this is currently undergoing changes (downwards) over the next few weeks. I'd wait a few weeks before fixing if that's what I wanted to do.

The variable rates are similar to most lenders, but this varys and it's hard to say without more info.

The better way to go about this would be to ask your broker what alternatives there are to the SVR within CUA. If you're already at 90%, moving lenders will be a very expensive exercise due to the LMI involved.

 

[Redom]

Which bank is offering the lowest SVR rate with 90% LVR and I/O (loan ~$430k) ?

My specific question : I have an unconditional loan from CUA fixed for 3 years at 4.84 I/O, with 100% offset. I am yet to settle on my PPOR and I am beginning to think fixed for 3 years is not a good idea. If I walk way from this, what sort of penalties would I pay, if any ?

Looking at past trends, looks like fixed rates are most of the times an indicator of what the variable rates will be. So I am thinking I will go variable now and fix it down the track.

It will be an extra hit on my credit file but I wont be able to purchase my first IP untill mid/late 2016 with my current plans anyway (and no other purchases requiring credit inquiry), so I guess this extra hit wont make a difference. Till date I have only three queries (I hope) Toyota, NAB and CUA.

My broker is just tired of me asking him all these questions and making him change my loan application a few times. I am just learning along the way and want the best in my interest.

Consider your longer term goals aussieB - will you need to access equity in the future, will you be able to release, etc.

Nonetheless, you can get considerably cheaper 3 year fixed rates - ME Bank are at 4.28%. That's a material difference IMO. As Peter said, fixed rates are tumbling from most lenders, so their likely to come down with the market.

Cheers,
Redom

 

[Rolf Latham]

Which bank is offering the lowest SVR rate with 90% LVR and I/O (loan ~$430k) ?

this week, last week, or next week ?

ta
rolf

 

[Corey Batt]

Be sure to make sure where ever you do end up, that their policy is sufficient enough to provide flexibility for releasing equity in the future for IP's as well as enough serviceability to keep accessing as you go along.

 

[aussieB]

Is lowest rate really your top criteria? I dont think its in my top 5 or 6

Do you plan to have more properties or are you happy with the amount you have?

If you want more properties, you have to trust your brokers path that he's mapped out for you. If you don't, find another.

At the moment, it is. This is one of the ways I can save up for my IP.
Would you care to share your top criterion please ?

I have no IPs at the moment and definitely plan to buy a few IPs next year on wards.

I dont think my current broker has my best interests in mind. Laid a spread of lenders and said take your pic but go with westpac. Isn't a proponent of I/O loans and it took a great deal of pushing for my loan to be converted from PI to IO. May be this required a lot of paperwork. Doesn't want to correspond on email. Had never heard of a bank which gave a 100% offset on fixed rates. And I haven't heard of any brokers in Darwin who aren't pushing their favorite bank/lender. This is the last time I am using his services.

 

[aussieB]

Thank you for replying.

@Peter, What is not right about the question ? I am not particularly attached to CUA. They were the only lender providing a 3 year fixed with a 100% offset when I was researching about them back in Aug/Oct last year. I think CUA will be out of the question as their SVR is too high for 90% LVR. I dont think they do a SVR for 90% LVR at all. For 80% LVR I think they are competitive.

@Redom, Yes, I will need to access equity in the future (but this being a unit, it will be way into the future).

@Rolf, this week.

@Corey, Will do.

 

[Terry_w]

At the moment, it is. This is one of the ways I can save up for my IP.

Why would you want to save up for an IP. You would want to build up equity andd borrow from an IP so you may need a loan with a lender that has a good LOC product and will allow valuations and increases when you need them.

 

[Peter_Tersteeg]

My point is you can't compare one lenders standard variable rate to another. They're not the same, but they're usually not the actual rate you pay.

The CUA saying their SVR of 5.40% is lower than the ANZs SVR of 5.88% is irrelevant because you wouldn't take the SVR product from either lender.

With the ANZ you'd probably end up taking their professional package which for that price point has an interest rate of 5.08%, but every broker worth their salt knows you can probably negotiate this down to 4.88%.

The CUA equivalent product appears to be priced at 4.91%.

Furthermore, their fee structures for each lender are different so this will also have an impact on the actual price of the loan.

Nobody ever takes the SVR product, so asking for a comparison on this basis is a moot point. Additionally by trying to compare the fixed product to the SVR product based on rate alone, you're not making a fair comparison.

There's also plenty you can do to work around the lack of an offset account on fixed products.


*** The ANZ rates I've quoted above do not include the 0.25% reduction which will be applied next week. I don't know if the CUA quoted rates include this or not.

 

[Marty McDonald]

@Rolf, this week.

.

Did you missed Rolf's point?

It's a moving feast don't get caught chasing 0.05% pa for the sake of future flex.

 

[aussieB]

Peter, thanks for replying. I see your point.

Marty, gee, I did

Why would you want to save up for an IP. You would want to build up equity andd borrow from an IP so you may need a loan with a lender that has a good LOC product and will allow valuations and increases when you need them.

sorry, I did not understand this. My current purchase is a PPOR. This is my first property. I do not see the point of building up equity and drawing a LOC whose interest rate is greater than my home loans interest rate. Instead, I have opted for an IO loan and plan on putting all my monies/savings into an offset account till the time I have enough deposit for an IP and then take the money from the offset. May be what you are saying will be applicable to a 2nd IP ?

 

[Peter_Tersteeg]

sorry, I did not understand this. My current purchase is a PPOR. This is my first property. I do not see the point of building up equity and drawing a LOC whose interest rate is greater than my home loans interest rate. Instead, I have opted for an IO loan and plan on putting all my monies/savings into an offset account till the time I have enough deposit for an IP and then take the money from the offset. May be what you are saying will be applicable to a 2nd IP ?

Don't put the equity funds into an offset account. Leave it in the redraw facility for the loan itself. In an offset account you risk mixing borrowed funds with personal funds, creating problems with tax deductibility. There would be other issues if the offset account is linked to a non-deductible loan (such as your PPOR mortgage).

Terry has some good reasons for suggesting a LOC as the product to facilitate accessing equity, which goes back to the same deductibility issues. Often though, I don't think a LOC product is necessary to solve this problem and it does make for a significantly more expensive loan. Plenty of lenders do have I/O variable product which funds can be drawn from directly in multiple ways including bank cheque, direct debt transfers and BPay. For those that don't it is fairly easy to set up secondary transaction accounts which also takes care of this issue.

Terry makes an excellent point about future ability to access equity, valuations and cash out policies. Choosing the lender based on some basic features and rates can come at substantial cost to investors later on.

Make sure that when you're setting this up that your broker understands the implications of what you want to do. I'd be very reluctant to use a fixed loan with offset to access equity.

 

[Corey Batt]

Peter, thanks for replying. I see your point.

Marty, gee, I did


sorry, I did not understand this. My current purchase is a PPOR. This is my first property. I do not see the point of building up equity and drawing a LOC whose interest rate is greater than my home loans interest rate. Instead, I have opted for an IO loan and plan on putting all my monies/savings into an offset account till the time I have enough deposit for an IP and then take the money from the offset. May be what you are saying will be applicable to a 2nd IP ?

Don't take the funds from the offset account as the IP deposit. Instead pay the funds into the PPOR loan account, then have a seperate investment loan split taking the same funds out (and any equity available from CG). This will reduce your PPOR non deductible debt, whilst maximising your deductible debt. Just taking it from your offset account won't achieve this.

Find yourself a savvy investment based mortgage broker if your current one isn't giving you this advice - clearing a lot of these early hurdles will mean that you can make the best decisions which will direct your future plans.

Edit: Peter beat me to it.

 

[JameZ]

Hi AussieB,

I've walked the road you are walking now, my advice, before you do another thing, kick your current broker, and speak to one that understands property investments quick smart.

Pick one from any of the above that has replied.

They will map out an investment journey for you based on the goals and plans you have set out to achieve. Good luck.

 

[NPB]

Hi AussieB,

I've walked the road you are walking now, my advice, before you do another thing, kick your current broker, and speak to one that understands property investments quick smart.

Lets be honest I think the current broker will not lose any sleep over that happening

 

[aussieB]

Doesn't what you say conflict with what Jamie M says :

Instead, you can place your money into the offset account which will reduce your PPOR interest repayments whilst the funds are sitting in the account. When this property becomes an investment property in the future, you can move the funds from your offset account on to your next PPOR. This way, you've increased your tax deductible debt and reduced your non tax deductible debt.

 

[JameZ]

Lets be honest I think the current broker will not lose any sleep over that happening

And I don't expect him or her to. The suggestion is for OP to be on the right path for his investment journey, what does the current broker have anything to do with it?

 

[Jess Peletier]

Doesn't what you say conflict with what Jamie M says :

Corey is right. And so is Jamie, incidently From what I can gather Jamie is talking about buying a new PPOR and turning current PPOR into an IP. Corey is talking about the best way to fund the deposit for a new IP, not a new PPOR.

They are different strategies for different purposes.

 

[Terry_w]

Peter, thanks for replying. I see your point.

Marty, gee, I did


sorry, I did not understand this. My current purchase is a PPOR. This is my first property. I do not see the point of building up equity and drawing a LOC whose interest rate is greater than my home loans interest rate. Instead, I have opted for an IO loan and plan on putting all my monies/savings into an offset account till the time I have enough deposit for an IP and then take the money from the offset. May be what you are saying will be applicable to a 2nd IP ?

That is why you are asking for the cheapest rate because you don't understand the other important issues to be considered.

I suggest you start reading all the threads in the tax and finance section.