Need home loan advice

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Guju said:
then invest more again (but I fear capital growth will be much slower moving forwards, and recession may be around the corner). Also, keep upgrading your prinpical home and increase its value too. That's my take. Easy to say but hard to do.

I am still driving a Subaru liberty 2006 model sedan (sigh).
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It's a really weird situation presently. I'm pretty light on for investments currently, so only following it vaguely. But seems to me we have overpriced share markets, gold at high levels, property bubble potentially and record low interest rates, including negative rates in parts of the world. Even heard a suggestion the other day that Bitcoin is a safehaven currently. :oops: :oops:
 
Kruzering said:
Classic 2 comments 2 bits of conflicting advice

One way = driving a Porsche and living large by 60 or struggling and on pension

The other= driving a new Mazda 3, safe and comfortable

I dont Iove my job so the gamble is tempting
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Hey I drive a Mazda 3!!! :(
 
I just reduced my home loan to 2.98% so a big drop for me. How does defering payments work? What if I made additional payments while deferring. I don't know how it works. Is there any way I could walk out with access to more money at the end?
 

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Deferring the payments is hardship. The banks can't assess them all properly at the moment because of the demand so while they are handing them out like lollies I would personally be very reluctant to take it if you are still fully employed and earning your regular income still. You might get one or two rounds of hardship max before a mortgagee in possession situation. So if you take it now when you don't need it, the wider economy starts to recover and everyone else is back to making full repayments, but you then genuinely need hardship you are in a lot of bother, the banks won't let you defer for 12 months+. By deferring you end up paying more interest anyway.

From a personal perspective though happy for everyone to do it, need the bank's interest income to drop 30% to get the government $1,500p/f instead of getting out right sacked and not being eligible for Centrelink :)
 
I echo the comments above. Keep making repayments if you can because deferring means the loan gets dragged out with more interest added on in the end.

Banks make it sound like they are being generous by offering deferrals to mortgage repayments, but you actually end up paying more by taking it up.

Best is to put as much as you can into the offset account. Thus reduces interest and you can still access the money whenever you want.
 
Seeds said:
banks are currently offering under 2.3 percent on fixed home loans for atleast 2 years? Why wouldnt everyone refinance their home loan to take advantage of this given variable rates are above 2.8 percent? Can anyone explain this to me? Variable rates arent going below 2 percent. so why wouldnt everyone do it?
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Because probably after the two years is up - and who knows where interest rates will be then - the rate will probably be at 5% or something stupid when the deal expires.
 
Seeds said:
Dont they just go back to the variable rate after the 2 years are up?
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Not positive, but on our "introductory offer" with CBA three years ago, our figure was 3.92%. When the loan was due to end they told us upon expiry our interest rate would have gone up to 5.07% or something.

Safe to say we financed through a different lender.

And also, refinancing is a pain in the arse. If you're not working as well, you can't really provide pay slips.
 
Seeds said:
Dont they just go back to the variable rate after the 2 years are up?
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Most banks go back to the standard variable rate which is about 4.5% currently after the fixed term expires.

You can always pay a fee and refix to the prevalent fixed rate at the time or try to negotiate the rate with your existing lender but they won't get close to what they are offering new customers.

You can also refinance but that is dependent on still having a job and your LVR, might be difficult if property prices happen to drop.

Banks must make a packet from people who take fixed rates and then have a marriage breakdown or whatever and have to sell or refinance to one name.
 
Hamingja said:
Most banks go back to the standard variable rate which is about 4.5% currently after the fixed term expires.

You can always pay a fee and refix to the prevalent fixed rate at the time or try to negotiate the rate with your existing lender but they won't get close to what they are offering new customers.

You can also refinance but that is dependent on still having a job and your LVR, might be difficult if property prices happen to drop.

Banks must make a packet from people who take fixed rates and then have a marriage breakdown or whatever and have to sell or refinance to one name.
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In my experience working for a bank this isn't always the case - if you are on your banks "banking package" thing with the annual fee of ~$400, after your fixed interest period expires you can get a pretty heavily discounted variable rate. The standard variable might be at ~4.5% standard variable but with the package you can get 1.5% or better discounts. I have seen existing customers get better discounted rates than what they are offering new customers in some cases. At ANZ it's the breakfree package which is $395 per year covering all fees and if you're on it and have a standard variable rate home loan, you just need to ask for a pricing request and they'll get you a discount pretty much on the spot.

If you aren't on that package and just have the old no frills loan without the package (for smaller loan balances this makes sense) you won't get a discounted rate.
 
Cruyff14 said:
Because probably after the two years is up - and who knows where interest rates will be then - the rate will probably be at 5% or something stupid when the deal expires.
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Please don't listen to this.
 

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Oraaaaazio said:
In my experience working for a bank this isn't always the case - if you are on your banks "banking package" thing with the annual fee of ~$400, after your fixed interest period expires you can get a pretty heavily discounted variable rate. The standard variable might be at ~4.5% standard variable but with the package you can get 1.5% or better discounts. I have seen existing customers get better discounted rates than what they are offering new customers in some cases. At ANZ it's the breakfree package which is $395 per year covering all fees and if you're on it and have a standard variable rate home loan, you just need to ask for a pricing request and they'll get you a discount pretty much on the spot.

If you aren't on that package and just have the old no frills loan without the package (for smaller loan balances this makes sense) you won't get a discounted rate.
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I have worked for a big 4 with the packages. The standard discount from the package relates to the size of the loan. Then in the background you can apply for better pricing. It all depends on whether the bank have met their targets for the quarter. One day someone with an $800,000 loan gets 1.5% discount, a month later the next person might only get offered 1% with the same loan and LVR.
 
Hamingja said:
I have worked for a big 4 with the packages. The standard discount from the package relates to the size of the loan. Then in the background you can apply for better pricing. It all depends on whether the bank have met their targets for the quarter. One day someone with an $800,000 loan gets 1.5% discount, a month later the next person might only get offered 1% with the same loan and LVR.
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How accurate are the online borrowing calculators?
 
Hamingja said:
I have worked for a big 4 with the packages. The standard discount from the package relates to the size of the loan. Then in the background you can apply for better pricing. It all depends on whether the bank have met their targets for the quarter. One day someone with an $800,000 loan gets 1.5% discount, a month later the next person might only get offered 1% with the same loan and LVR.
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Not trying to shoot you down & I can only speak for my experience with ANZ but the retention pricing discounts go up/down based on loan size & internal credit history... two people with the same loan balance may get completely different discounts but there's been a pretty consistent range of discounts across the entire time I've been with the bank as far as minimum-maximum discounts that breakfree customers can get. There doesn't seem to be any correlation vs how good the quarter went as the same range of discounts still pop up but I can't speak to that for certain as I am obv not part of the calculation of discounts.

This wasn't my point anyway, initially you said that they won't get close to new customer offers which isn't always right, there's been some at close to the same rate as new customers & plenty of times where they didn't get as good as new customers but they got very competitive rates & in most cases, it was to a point where it wasn't worth the effort of refinancing.

With ANZ though, pricing discount is lifetime pricing & new customer pricing generally expires after a promotional period. Discount pricing lasts for the life of the loan/package so if you go off the package/sell the house etc. the discount drops off and have to apply for a new discount/pricing request if you get a new loan but the standard variable home loan rate can go up & down and the discount continues to apply. If rates go up, customers can try for a new (higher) discount. If rates go down, you get that same discount anyway. I got a 1.41% discount on my loan 2 years ago and still have the same discount despite changes to the SVR. Standard variable home loan rate is now 4.39% so -1.41% & I am at 2.98% which isn't the best discount available to customers & not the best rate around but probably not worth me refinancing over unless I'm getting the best of the best rates elsewhere.

Deliverance said:
How accurate are the online borrowing calculators?
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Depends. Some are more accurate than others, ANZ tends to underestimate on the website I have found which you might find strange, you might think they'd overshoot borrowing capacity to get people in the door but it's probably a good thing as it doesn't give people unrealistic expectations.

At the end of the day though it could go either way, they really are only a rough estimate as it depends on your credit rating, actual income & expenses vs what people put in the calculator (always understate expenses even when they swear they're not) & assets/liabilities etc. - go into the bank and see what they say. Don't go to 10 banks and apply at all of them to see who will give you the most, I see plenty of people do that but it will wreck your credit rating.
 
Oraaaaazio said:
Not trying to shoot you down & I can only speak for my experience with ANZ but the retention pricing discounts go up/down based on loan size & internal credit history... two people with the same loan balance may get completely different discounts but there's been a pretty consistent range of discounts across the entire time I've been with the bank as far as minimum-maximum discounts that breakfree customers can get. There doesn't seem to be any correlation vs how good the quarter went as the same range of discounts still pop up but I can't speak to that for certain as I am obv not part of the calculation of discounts.

This wasn't my point anyway, initially you said that they won't get close to new customer offers which isn't always right, there's been some at close to the same rate as new customers & plenty of times where they didn't get as good as new customers but they got very competitive rates & in most cases, it was to a point where it wasn't worth the effort of refinancing.

With ANZ though, pricing discount is lifetime pricing & new customer pricing generally expires after a promotional period. Discount pricing lasts for the life of the loan/package so if you go off the package/sell the house etc. the discount drops off and have to apply for a new discount/pricing request if you get a new loan but the standard variable home loan rate can go up & down and the discount continues to apply. If rates go up, customers can try for a new (higher) discount. If rates go down, you get that same discount anyway. I got a 1.41% discount on my loan 2 years ago and still have the same discount despite changes to the SVR. Standard variable home loan rate is now 4.39% so -1.41% & I am at 2.98% which isn't the best discount available to customers & not the best rate around but probably not worth me refinancing over unless I'm getting the best of the best rates elsewhere.


Depends. Some are more accurate than others, ANZ tends to underestimate on the website I have found which you might find strange, you might think they'd overshoot borrowing capacity to get people in the door but it's probably a good thing as it doesn't give people unrealistic expectations.

At the end of the day though it could go either way, they really are only a rough estimate as it depends on your credit rating, actual income & expenses vs what people put in the calculator (always understate expenses even when they swear they're not) & assets/liabilities etc. - go into the bank and see what they say. Don't go to 10 banks and apply at all of them to see who will give you the most, I see plenty of people do that but it will wreck your credit rating.
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Thanks was more thinking, hypothetically, if someone owned their home mortgage free, would the bank loan them more for an investment property than the calculator suggests?
 
Deliverance said:
Thanks was more thinking, hypothetically, if someone owned their home mortgage free, would the bank loan them more for an investment property than the calculator suggests?
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Perhaps. But only because the calculator is underestimating how much you could borrow anyway.

Person A owns a house with no mortgage, has 100k for a deposit on investment property, makes 80k a year, has 20k in expenses
Person B owns no house & has no debt either, has 100k for a deposit on investment property, makes 80k a year, has 20k in expenses
Assuming all other circumstances (number of dependents, credit rating etc) are identical, they both would have the same borrowing capacity. It comes down to whether you can service the loan (make the repayments), not what assets you have.. the extra assets can help as far as you can use them as security/"collateral" for the loan along with/in place of cash deposit but won't help you in being able to borrow more money.

So an example for that scenario:
Person A has no salary/dividend/rental income etc. & $20 million in property owned outright
Person B has 60k in income per year, $100k in the bank for a deposit, owns no other property

Person B has a higher borrowing capacity. If you don't have the income to pay for a loan, you won't get it.

You may be across that but plenty of people aged 45-70 have come in to the bank to ask for a loan and have no income thinking they could borrow against their other assets.
 
Cruyff14 said:
Just got a letter from Bank of Melbourne today telling us our loan has dropped to 3.02%. Winning.
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Can get fixed loans atm for 2.19% and in some instances $2K cashback for new customers. Worth shopping around as 3.02% isn't really 'winning' (but changing providers is an absolute pain in the ass)
 
burge13 said:
Can get fixed loans atm for 2.19% and in some instances $2K cashback for new customers. Worth shopping around as 3.02% isn't really 'winning' (but changing providers is an absolute pain in the ass)
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Yeah, refinancing is a pain, especially with valuations etc.

Our construction loan is at 2.79% atm, when we get pre approval it was 3.32%, so huge drop in that already.
 
Deliverance said:
How accurate are the online borrowing calculators?
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I've never really checked them. I'd suggest if you have simple circumstances they are probably not far out. So if you pump in that you earn $80k a year and you are a teacher or accountant or whatever who just earns a base salary then yeah I'd say they would be around the ballpark. If you are a nurse or truck driver or something that earns $80k a year but $30k of that is from weekend rates, overtime, meal allowances etc then the bank will discount all that stuff and you don't really earn $80k in the eyes of the bank so it will be wrong. Like any calculator it comes down to what is input into it.
 
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