Mortgages in Australia - a general chat

[rdhopkins2]

Hi BF,

Let’s discuss mortgages in Australia. The good, the bad and the ugly.

For many, a mortgage is essential to finance the purchase of a home. When used responsibly, credit can be empowering.

So what do you make of the banks, lenders, regulators and everyone else that comes together in some form to make mortgages happen?

Have you got any interesting stories to tell?

 

[74561347]

mortgage (n.)
late 14c., morgage, "a conveyance of property on condition as security for a loan or agreement," from Old French morgage (13c.), mort gaige, literally "dead pledge" (replaced in modern French by hypothèque), from mort "dead" (see mortal (adj.)) + gage "pledge" (see wage (n.)). So called because the deal dies either when the debt is paid or when payment fails. Old French mort is from Vulgar Latin *mortus "dead," from Latin mortuus, past participle of mori "to die" (from PIE root *mer- "to rub away, harm," also "to die" and forming words referring to death and to beings subject to death). The -t- was restored in Modern English based on Latin.

 

[Hawk Dork]

Do you want to buy a home, but without violating Islamic laws against usury (riba')?
You need to find institutions that offer Islamic, or no riba', home mortgages which are compliant with Islamic law.
This is not a trivial business practice - the Prophet Muhammad is said to have cursed the consumer of interest, the one who pays it to others, the witnesses to such a contract, and the one who records it in writing.
There are financing companies that refrain from such transactions in favor of financing structures which are compliant with Islamic principles, such as lease-to-own and cost plus financing.

 

[Billy ray]

my mortgage doubled when i got a divorce and had to buy my place a second time around.. thankfully i had enough equity in the place to do it, and my wage could afford it.
i dont think i will ever pay it off, not before i retire. so when i get my super payout i presume a part of it will be final payment (if i choose to do that, could just keep paying it off month at a time). so i just treat my mortgage payments as rent i pay to the bank to live here

 

[aucklandhawk]

my mortgage doubled when i got a divorce and had to buy my place a second time around.. thankfully i had enough equity in the place to do it, and my wage could afford it.
i dont think i will ever pay it off, not before i retire. so when i get my super payout i presume a part of it will be final payment (if i choose to do that, could just keep paying it off month at a time). so i just treat my mortgage payments as rent i pay to the bank to live here

Wow. You had to buy your house twice or had to buy it 1.5 times? That's horrific.

 

[Billy ray]

Wow. You had to buy your house twice or had to buy it 1.5 times? That's horrific.

Yeh prob 1.5 times.

 

[Over The Post]

my mortgage doubled when i got a divorce and had to buy my place a second time around.. thankfully i had enough equity in the place to do it, and my wage could afford it.
i dont think i will ever pay it off, not before i retire. so when i get my super payout i presume a part of it will be final payment (if i choose to do that, could just keep paying it off month at a time). so i just treat my mortgage payments as rent i pay to the bank to live here

My unsolicited advice - worth what you paid for it - is get that place paid off. Don't go down to eating ramen and drinking International Roast, but live well within your means and put what you can on it. Once it is paid off it is yours forever and no matter how insane s**t gets with covid and the international financial situation, you're golden. It will be a huge weight off your shoulders and incredibly empowering, and you won't know what to do with the extra $2k a month in the hand. I could have paid my house off several times over but didn't, and when things unexpectedly turned to s**t they really turned to s**t plus I still had to pay the mortgage, 20 months later the house had to be sold. Since then I've paid $70k in rent, that's gone forever. Don't let it happen to you, please.

 

[Billy ray]

My unsolicited advice - worth what you paid for it - is get that place paid off. Don't go down to eating ramen and drinking International Roast, but live well within your means and put what you can on it. Once it is paid off it is yours forever and no matter how insane sh*t gets with covid and the international financial situation, you're golden. It will be a huge weight off your shoulders and incredibly empowering, and you won't know what to do with the extra $2k a month in the hand. I could have paid my house off several times over but didn't, and when things unexpectedly turned to sh*t they really turned to sh*t plus I still had to pay the mortgage, 20 months later the house had to be sold. Since then I've paid $70k in rent, that's gone forever. Don't let it happen to you, please.

Oh dont worry. Im never selling. Ill move out and rent it out if the right beachside place comes up for me to rent. But this place is a gold mine. And never selling.
Limited supply (<100 places) and high demand to get one.

 

[Kram]

my mortgage doubled when i got a divorce and had to buy my place a second time around.. thankfully i had enough equity in the place to do it, and my wage could afford it.
i dont think i will ever pay it off, not before i retire. so when i get my super payout i presume a part of it will be final payment (if i choose to do that, could just keep paying it off month at a time). so i just treat my mortgage payments as rent i pay to the bank to live here

HALF!!!

 

[Nothing]

My unsolicited advice - worth what you paid for it - is get that place paid off. Don't go down to eating ramen and drinking International Roast, but live well within your means and put what you can on it. Once it is paid off it is yours forever and no matter how insane sh*t gets with covid and the international financial situation, you're golden. It will be a huge weight off your shoulders and incredibly empowering, and you won't know what to do with the extra $2k a month in the hand. I could have paid my house off several times over but didn't, and when things unexpectedly turned to sh*t they really turned to sh*t plus I still had to pay the mortgage, 20 months later the house had to be sold. Since then I've paid $70k in rent, that's gone forever. Don't let it happen to you, please.

The numbers support a different view if you have access to liquid funds. Especially with loans under 3%. The worst super funds average return over the last 10 years would be ~7%. The difference between those compounding over your life time will make a massive difference. If you are investing all the extra money, you are better off making the absolute minimum mortgage payments, with the current low rates.

 

[Over The Post]

The numbers support a different view if you have access to liquid funds.

Which were used to meet bills, mortgage payments, school fees etc for 15 months until they ran out. Even then we went without and paid the mortgage every month to keep a roof over our head. I went from $157,000+super to casual employment earning $0 to $400 a week. The constant stress was a major contributor to my marriage falling apart. If the house had been paid off, it would have been our castle and the numbers could GAGF. Like a lot of people, we were in the position to have it paid off but never did. You're absolutely right about mortgage rates vs investments right now (not then) on paper. I'm talking real world security for yourself and your family. "It'll never happen to me" was my mantra. It ******* well did. I've stopped pretending it'll never happen to others as well.

 

[Mofra]

It's always worth knowing what lenders are offering, even if you have no intention of leaving.

If you see a cheaper offer, ask your lender for a payout figure. Chances are you'll get a call from a 'retention team', and have details of the other offer ready. Often they'll offer you a discount to your existing rate to stay with them (cheaper to keep customers than attract new ones, etc). All you've done is a little internet searching and made a phone call or two and you've suddenly given yourself a cheaper rate.

 

[burge13]

Often they'll offer you a discount to your existing rate to stay with them (cheaper to keep customers than attract new ones, etc). All you've done is a little internet searching and made a phone call or two and you've suddenly given yourself a cheaper rate.

You'd assume this but the CBA are morons from my experience

Years ago I left CBA (4.5% or so from memory) to go to ING rate in the mid-low 3's

CBA ring and say they'll match it if I stay, I agreed to this then she says "so the best we can do is 3.9%", "that isn't matching then is it" and she let me walk.

Also when signing a new customer on a "welcome offer" is costing them even more. Moved to ANZ who gave $4K to new mortgages, easy money for me, and by the time I leave again for a better deal (I usually move every 2 years or so now to get the best rates) they'd not have even made their $4K back on interest let alone man-hours on the new deal...

Some bizarre ideas at banks. They're making too much money it doesn't matter how stupid their decisions are I guess.

 

[Hamingja]

Yeah banks don't care at all about existing customers basically.

To me it is illogical given the amount of money it costs to get new business. Refinance cash backs, broker commission / broker trail OR employing lending manager and retaining bricks and mortar branch for them to operate out of, business development managers, credit assessors etc.

The only thing really is that by churning customers you do have a better understanding of their current credit worthiness. If you have approved an application 10 years ago and you are just giving them blind discounts to the sharpest market rates you have no idea really what their current position actually is and whether the rate your are giving them is adequately compensating the bank for the risk in lending them the money.

I guess when banks go to the market to securitise the loans to free up capital to lend more there must be stipulations in place as well for what the banks are allowed to include in the tranche.

 

[Over The Post]

The only thing really is that by churning customers you do have a better understanding of their current credit worthiness.

I was with Westpac in NZ for 20 years before I moved over here, and again for 15 afterward. My credit rating was 825 and they were falling over themselves offering personal loans, car finance, automatic credit card limit increases. Some of which we took advantage of. It was very flattering and they were very good at massaging egos of their "premium" customers.

After all our savings had gone and we were doing it tough, they sent my accounts to Baycorp for collection. I had those *ers on my back several times a week for two years. I was literally suicidal a couple of times. In the end there was no more coping with the constant badgering and random-amount threatening letters and I was forced to declare bankruptcy to get them away.

We also had a Citibank credit card, they had a s**t reputation but were really understanding, considerate and helpful. I can't speak highly enough of them.

What didn't help was after the banking royal commission, Westpac sent me a letter saying my accounts did not meet the criteria for referral to a collection agency, and "we apologise for any inconvenience."

I'm so glad my inconvenience was important to them.

 

[Scotland]

Banks not caring about existing customers is great for people who do their homework.

To get the best deal you really need to change every year or two. Sometimes banks even offer a cashback to refinance. $2k in the pocket, <$1k in fees and a better rate for the next 12 months. Rinse, repeat.

Best decision I've ever made WRT home loans was to get an offset account.

 

[burge13]

Makes sense at an employee level and even middle management level to find new customers. Their bonuses are attached to that kind of thing aren't they? They probably have very little incentive in their bonus structure to keep someone over signing up a new customer even though in the bigger picture it's better to keep than find new?

Banks are grubs regardless though, and stupid. No matter how many times I explain my salary sacrifice making my net pay $150 per fortnight better, all they care about is "is this deduction optional in the event you need to cancel?". Yes, it is but why the * would I want to? How/why are you approving loans if you don't understand this.

 

[Hamingja]

Banks are grubs regardless though, and stupid. No matter how many times I explain my salary sacrifice making my net pay $150 per fortnight better, all they care about is "is this deduction optional in the event you need to cancel?". Yes, it is but why the fu** would I want to? How/why are you approving loans if you don't understand this.

It's because some of them aren't optional. There are some government ones for example, QLD I think are the major culprits, that have super salary sacrifices in their salary package that they can't cancel and turn into gross income so if it is not optional they have $150p/f that they can't use towards the mortgage.

 

[burge13]

It's because some of them aren't optional. There are some government ones for example, QLD I think are the major culprits, that have super salary sacrifices in their salary package that they can't cancel and turn into gross income so if it is not optional they have $150p/f that they can't use towards the mortgage.

Mine is literally paid into my bank account as cash, in my instance there is literally zero upside in canceling as its repaid to me as cash anyway. Their job as a lender should be to understand peoples financial positions...

 

[Hamingja]

Mine is literally paid into my bank account as cash, in my instance there is literally zero upside in canceling as its repaid to me as cash anyway. Their job as a lender should be to understand peoples financial positions...

Which is why they are asking you the question to find out. It could be going to a novated lease for all they know.

 

[burge13]

Which is why they are asking you the question to find out. It could be going to a novated lease for all they know.

Asking is fine. Not accepting i would never want to cancel it and not calculating the loan on gross rather than nett pay (ignoring sal sac benefit and only caring about whether its optional) is the issue

Each bank has failed to understand the position. Its an odd deal, granted but they never calculated it properly

 

[Punt Road Feral]

What’s peoples thoughts on hybrid loans? Ie. mixed structure of fixed and variable?

5 years ago I would’ve been dead against certain fixed loans as some of them you can’t pay off additional amounts but now that offsets are more regular and fixing can be done for smaller periods eg. 1-3 year terms.
It doesn’t seem a bad proposition to fix a portion of your loan under 2% these days which really is bugger all.
I can’t see interest rates going much lower, they’ve pretty much hit the floor.

In general it might be extremely basic advice but I feel like with interest rates being so low that it’s a fantastic opportunity just to pay down as much debt as possible now while the terms are pretty favourable to the lender.

 

[rdhopkins2]

mortgage (n.)
late 14c., morgage, "a conveyance of property on condition as security for a loan or agreement," from Old French morgage (13c.), mort gaige, literally "dead pledge" (replaced in modern French by hypothèque), from mort "dead" (see mortal (adj.)) + gage "pledge" (see wage (n.)). So called because the deal dies either when the debt is paid or when payment fails. Old French mort is from Vulgar Latin *mortus "dead," from Latin mortuus, past participle of mori "to die" (from PIE root *mer- "to rub away, harm," also "to die" and forming words referring to death and to beings subject to death). The -t- was restored in Modern English based on Latin.

Didn’t think this would turn in to an etymology lesson

 

[Over The Post]

Flatmate works at the zoo, she walked into the lunchroom and there was a very heated argument between experts about naming conventions of different ant species. They were literally raging about the etymology of entomology. I thought it hilarious.

 

[rdhopkins2]

Do you want to buy a home, but without violating Islamic laws against usury (riba')?
You need to find institutions that offer Islamic, or no riba', home mortgages which are compliant with Islamic law.
This is not a trivial business practice - the Prophet Muhammad is said to have cursed the consumer of interest, the one who pays it to others, the witnesses to such a contract, and the one who records it in writing.
There are financing companies that refrain from such transactions in favor of financing structures which are compliant with Islamic principles, such as lease-to-own and cost plus financing.

I’m surprised this hasn’t taken off more in Australia.