Working out finance for first IP

[Colin]

Hi all,

I am looking to buy my first IP in the near future. I am currently looking at my finance options. I've been in contact with a broker and they have been doing some research for me.

I am looking at getting an IO loan with an offset account. My broker has told me that the lenders she has looked at that give this type of loan typically have fees attached.

EG a Monthly $10 fee for the IO loan and an additional $5 to include an offset account.

What I would like to know is if this kind of fee structure is normal. Also what other fees are typical with different types of loans.


Thanks in advance,
Colin

 

[Rolf Schaefer]

not knowing too much about your assets, liabilities, serviceability I still would say you should be able to do better.

If you have an owner occupied home with non tax-deductible debts then you surely would have an Offset account for that; hence no need for another offset.

Some banks/lenders offer fee free banking without offset accounts; other only charge a monthly fee for the offset account (something like $8 per month).

 

[Colin]

I earn approx 35k after tax.
I have a car loan $178.82fn min repayment (Putting in $254fn). The car is used for work so is deductable.
I have $25k in savings and am aiming to have that up to $30k by the end of the year.
I have no other property or assets/liabilities.

If any other info would help I would be glad to provide it.

Thanks,
Colin

EDIT: I'm in South Australia too if that matters.

 

[alexlee]

Might make sense to pay off that car loan. Even though it's tax deductible your tax rate is only 30% so you're still paying 70% of it. Not to mention part of it is for private use, right?

The Adelaide market, certainly, isn't going anywhere right now, so you're not going to lose anything by waiting a year to save up more after paying off the car loan.
Alex

 

[Shonnie]

Hey there,
We are currently looking for exactly the same type of loan for our first PPOR to become our first IP.. I've been doing a bit of research and found that some guys worth looking at ARE..

Gateway Credit Union
They have a low comparison rate (7.29%)with zero ongoing fees. Very helpful over the phone too- they are a credit union for CBA and you can get an attached commonwealth credit card..

Another one I've been looking at is Virgin Money- 7.11% comparison rate with zero ongoing fees- and you can get a virgin credit card with it too.. no monthly fees etc etc. The IO period is for 5 years and it costs you $300 to refinance at the end of those five years.. I'm looking into them further.. only down side is that you can only have a max of 5 transactions per month before some minor fees kick in- dont really think its a big deal but worth thinking about..


I've also just emailed My Rate enquiring about their IO with offset and asking for a comparison- I'll keep you posted on those guys.. Just look around-

If you already know the sort of loan you want then good places to look are Home Loan Review sites as they feature the pros and cons of each loan from people who actually have them.. Good luck!

 

[Rolf Latham]

Hiya Colin

Seeing you are in Adelaide, Adelaide bank have a new product release.

7.05 variable with 100 % IO offset or 7.35 fixed five years with 100 % offset

Many (but not all ) brokers would have access to this.

Id suggest you dont get stuck on fees and charges .................rate can be an issue but a few fees here and there for the capacity to do another deal 2 or 5 years earlier.........bears thinking about doesnt it.

ta
rolf

 

[yadreamin]

In 2000 l wanted to buy the house next door to us. It was on the market and l could have got it for 215k. I rang our bank. We owned our PPOR owned our vehicles, had no personal debt and an income of 80k+.The bank didnt think they could help us. Actually they were quite sure it would be difficult for us to make this purchase and sugested we not go ahead with it.If you only new how hard it was for us to get a vehicle loan a couple of years earlier with this bank.To say the least l was very disalusioned at how this could be and how did some people buy multiple houses..To cut a long story short l stumbled across a Mortgage Broker with i the next 3 months and had an appointment with them to see what our financial situation was. In short we were able to borrow $850k.My answer can l have that before lunch.I was truly bloody gobsmacked.I have not bothered with the bank much since then. The house next door is now worth 550k.
To be honest stop running around trying to find the best fees etc with all the different banks and get yourself a good property savy mortgage broker and you wont look back.A MB will work for you a bank will only work for themselves.It cost you nothing to use a MB keep all your energy to search for properties.
Rant over.
cheers yadreamin

 

[Colin]

I definatly see the wisdom in going broker route. I just want to be sure that what my broker is offering me is the best advice.

What kind of questions should I be asking?

What should I be looking at when comparing loans?

I know I want it to be IO with an offset but what other features are likley to vary between different loans and what are the pros and cons?

Again, thanks for the help it is very much appritiated.

 

[Bandita]

Another one I've been looking at is Virgin Money- 7.11% comparison rate with zero ongoing fees- and you can get a virgin credit card with it too.

That credit card is free anyways, we have one, no loan with them

Make sure when looking for your first loan with offset, you're looking at the "professional" type loans as well - you'll get all the accounts you'd ever want included (offset, checking, savings, rewards credit card) and they'll give you a minimum of 0.6% off variable rate - minumum loan is usually under $250k. It worked great for us to start off with, as we needed all those types of accounts and didn't want to be paying any extra fees.

Cheers,
Jen