Browse Forums Home Finance 1 Sep 01, 2009 3:25 am Hi Guys, I'm about to sign a contract on a $770k unit that will be my primary place of residence. I'm currently using a broker who has applied for finance with ING. I'm pretty confident it will go through. One of the advantages of going with ING is that if you have 85% LVR and meet their criteria, you qualify for the Reduced Equity Fee (REF), which means no LMI required, just a $700ish flat fee. However, it's a bit touch-and-go whether or not I will achieve the 85%. I'm slightly above at about 86% at the moment, but will probably have just enough by the time we hit settlement in 60 days. That's IF the bank valuation comes back at exactly my purchase price of $770k. I could save $30k ovr the life of the loan if I went with State Custodian's Standard Variable (4.79 first 5 yrs, 4.59 thereafter), even if I got the REF with ING. If I didn't get the REF I'd save $46k! So I currently have a couple of dillemas with my finance: 1 - ING is a pretty good deal, and established and reputable, but I can't help but wonder why I would pay an extra $30-46k to go with them. A little dilemma here is that my broker has been spending a lot of time working with me through my application, but State Custodians don't deal with brokers. I'd be stiffing him if I went with SC. 2 - Neither of these loans have an offset account. Apparently ING are working on an offset product right now, but there's no guarantee that it will be released or whether it would be available to me if/when it does. No I'm not totally clear on what the tax implications of offset vs redraw are. In my mind they're the same, but I've seen statements on forums that 100% offset is best for investment properties. I have no idea why that's the case. It's entirely likely that this apartment will become an IP in the next 5 years. So this might sounds stupid, but say I went with State Custodians, I'd like to pay the broker for the time he spent on my application. What would be a reasonable amount to pay him? Are there other products I should be looking at? I've banked with ANZ for years, just moved my business accounts to them and have paid of 2 cars with Esanda. Their cheapest rate is 5.11%. Would they be negotiable on rates? Do banks negotiate on this? A friend got her bank manager to waive the LMI on her loan which was around $12k, so the rules aren't necessarily set in stone. Can someone explain why 100% offset is better than unlimited free redraw? Thanks!! Re: Finance advice needed - REF, Offset 2Sep 01, 2009 10:22 am The difference between 100% offset & redraw comes into play because you intend to turn the property into an investment property over time. Taxation wise when the property becomes an investment, you will be able to claim the interest on the loan as a tax deduction. If start out with a loan of $654500 & repay the debt down over the next five years you will only be able to claim the interest on the balance of the loan at that that time. If you are ahead in repayments & redraw the balance back up, you will not be able to claim the interest on the redrawn portion unless it has been used for investment purposes. The rule of thumb is that that what determines tax deductiblity is the purpose which the funds were used for. If you pay down the balance then redraw on the loan when you turn the property into an investment & use the funds to buy another owner occupied property then you are ruled to have repaid the debt on the investment property & the redraw amount is all personal debt. Offset accounts get around this as the balance on your loan remains the same but is simply offset against credit funds. You can take those credit funds & do whatever with them & the balance of the loan remains the same - thus keeping all of your loan tax deductible. I hope this helps! Re: Finance advice needed - REF, Offset 3Sep 02, 2009 11:06 am Hi azaram, I just had a good read over your post. Correction to my original description about the offset account: An offset account is a separate savings account where the credit balance in this account is offset daily against the loan amount. This Savings Account runs in conjunction with your home loan. This type of account when used correctly will reduce the interest that is charged on your mortgage. In relation to the existing Mortgage Broker that you have and whether or not you pay them for their time and effort that they have placed into your loan. This is a very nice gesture that you are prepared to offer the Broker and I am sure it would be greatly appreciated. To give you an indication as to what the Broker would be paid up front for your Loan of $654,500.00 with ING the Broker would be paid an upfront of $3,927.00 plus GST I can assure you that ING is an extremely competitive finance company who look after their clients exceptionaly well. We use them on a frequent basis. I hope this helps you out a little. Cheers Trent Bartels Residential & Commercial Finance Broker A & B Financial Solutions ...Solutions for your future info@abfinancial.com.au http://www.abfinancial.com.au Re: Finance advice needed - REF, Offset 4Sep 02, 2009 11:47 am A&B Financial Hi azaram, I just had a good read over your post. An Offet account is a savings account that runs in conjunction with a home loan where the interest earned on that account is applied to the interest that is paid on the loan. By doing this, you are depositing extra money on to the mortgage, which you can access when needed, and reduce the interest that is charged on your mortgage. Cheers Just to correct you The offset account does not earn interest. All it does is the amount in the offset account is applied against the homeloan and then interest is calculated on that balance. Re: Finance advice needed - REF, Offset 5Sep 09, 2009 1:36 am In relation to you wanting to pay the broker, I would offer you this to think about. If he / she was doing there job correctly in the first place, they would have asked your requirements on Offset / Investment into the future to see what other products would be suitable from other institutions. I work for a major bank as a mortgage innovator and it is not often that if a customer calls a deal off with me to go to a competitor, that they will offer a token payment because I couldn't get the deal through at the right rate or product. My suggestion is not to pay the broker. They have not done the transaction so should not be paid. Perhaps you should be considering other things other than just the interest rate. Flexibility is the key especially if you plan to use the property as an investment later down the track.. On a loan with a major bank on the amount you are borrowing you would receive a discount of .60% off the standard variable for the life of the loan. Do the sums again on that basis not just the short term. The rates that you quoted seem to suggest you pay more upfront for the first 5 years and less after that State Custodians, seems a little odd. What are the exit fees if you exit within the first 5 years. Other things to consider, traditionally smaller institutions are quick to put up interest rates when the RBA moves rates but slow to bring them down when they reduce. However the bottom line is 30K in your pocket is better off than in the banks/ lenders pocket. Yes, I had already tried searching those. In the end I am fabricating my own. 4 4175 you were just referred to get advice from your solicitor. This is a legal matter. Separately, why would you use a buyers agent for a house and land package? 3 56298 Hi All, I engaged a tradie to install concrete retaining wall 600-800mm high over 32 meters in Victoria. Sleepers are 200*75*2000 mm installed over 17 steel posts. I… 0 6901 |