The various banks all offer almost identical commission structures. I haven't heard of any broker choosing the commission rather than a suitable product, but I'm sure many will argue otherwise.
There have been studies done showing that the banks who got the most work from brokers aren't the ones offering the highest commission, but they are prepared for ASIC and aren't released to the media.
Some of the major considerations are:-
Interest rate Features such as an offset account, construction, variable, fixed etc Processing speed of the bank (important when purchasing) Requirements of the bank to gain approval matching what the information that a borrower can provide.
Is it for construction, or purchasing existing, or refinancing credit history Is FHOG applicable Unit or house New or old LVR LMI cost Ongoing fees Borrowers preference Lenders policy any other relevant factors pertaining to that particular request.
No one in the industry has a very high opinion of Aussie Home loans, they are at the bottom of the barrel, but the CBA write a large % of home loans in Australia, Aussie would refer a high percentage of applications to the CBA regardless of any internal directions. Don't quote me but I'm sure the CBA write over 20% of all home loan deals.
Brokers are expected to provide the most suitable home loan, not the cheapest, and there are good reasons for that. The cheapest may not be a suitable product, or it may be unavailable for the purpose required, or there may be other factors involved peculiar to that transaction.
First time buyers look for the cheapest rate, experienced buyers look for a good rate but they also want features that save them time and money, and they are usually more prepared to pay higher fees to achieve that. Everyone's preference is different.
The 1st sentence and the 3rd one seems to contradict somewhat... still, if you wish to say it is the case, I will not argue.
That is not quite the same thing, however, as what I was implying..
My local mechanic gives me a couple of choices for car parts so he can repair... however, if I buy the parts from ebay (or elsewhere), and hand them over to him, my costs are far lower... his ability (or willingness) to source is limited for various valid reasons... one of them being he might be able to skim a bit off the cost of parts.
If a broker chooses to compare X number of lenders... that decision is made from many factors... since not EVERY lender offers the exact same commission, the decision to not offer some lender's products has already been made before the range is presented to the clients.
Having said that, I don't dispute your list of criteria... I have done Banks for 4 loans, broker for 2 and simply comparison web site for my last... the bank's were the easiest, and most costly as negotiation and loyalty seems somewhat limited until you walk out the door, brokers were not quite as easy, but still quite painless, and the comparison site started out easy, but required a lot more legwork in the end to get across the line.
For next time, face to face with a (local) broker who has a very large range of lenders is tempting.... also, a local solicitor for conveyancing, or, at the very least, ready access to a JP who is not afraid to sign mortgage documents (we had one who simply refused to sign, stating that Qld had changed the laws as part of AML crackdown and JP's were under threat)... that was stressful as he had started signing the set of documents, but refused to complete them, and the entire set had to be done by only 1 person.
Hi just wondering how most people go about refinancing? Use a broker or just go into a bank? Mortgage house are offering 3.9% on investment loan. Westpac are currently slugging us with 4.6%. Any feedback appreciated!
Just remember, every dollar you pay off your loan attracts 0% interest, so just pay off your loans.
Thanks heaps for the replies. Seems theres no black or white answer. I know im never fixing ever again its cost me alot of money. We are both contractors. Im a bit suspicious of online applications. And yes paying the loan down as quick as possible is our goal its an IP and we rent but intend on moving into the house when its paid down. Thanks again
Thanks heaps for the replies. Seems theres no black or white answer. I know im never fixing ever again its cost me alot of money. We are both contractors. Im a bit suspicious of online applications. And yes paying the loan down as quick as possible is our goal its an IP and we rent but intend on moving into the house when its paid down. Thanks again
The thing with people is that they change their minds, or their needs and wants change, of life pushes them in another direction, etc etc.
You can pay down the loan and then move in and it will work out fine, but if you did it another way you have more options open to you. If you used an offset account and paid as much as possible into that account it's effectively the same as paying the loan off, but if you choose to buy a house for your own occupation elsewhere you can draw it out and still retain the tax deductibility on your investment loan.
Just something to consider.
Take risks - if you win you will become wealthy, if you lose you will become wise
The thing with people is that they change their minds, or their needs and wants change, of life pushes them in another direction, etc etc.
You can pay down the loan and then move in and it will work out fine, but if you did it another way you have more options open to you. If you used an offset account and paid as much as possible into that account it's effectively the same as paying the loan off, but if you choose to buy a house for your own occupation elsewhere you can draw it out and still retain the tax deductibility on your investment loan.
Just something to consider.
Cheer Rufus. That is the plan. The $ we are paying down are available and it needs to stay that way if we refinance. A broker i spoke to said if you draw the money back off you cant claim it on tax as you technically paid the IP loan down then used the money for something else? Doesn't seem right to me.
Cheer Rufus. That is the plan. The $ we are paying down are available and it needs to stay that way if we refinance. A broker i spoke to said if you draw the money back off you cant claim it on tax as you technically paid the IP loan down then used the money for something else? Doesn't seem right to me.
Let me explain.
Scenario 1 - if you pay down the loan and then redraw the extra that you have paid to buy another house then the interest cost on what you redraw IS NOT TAX DEDUCTIBLE. EG you had a $500,000 loan and you paid it down to $100,000 and then drew the $400,000 back to buy an owner occupied house, you will only be able to claim the interest on a debt of $100,000 - so you have LOST the ability to claim tax on $400,000 of your debt because you increased your loan from $100K to $500K and used the money for personal use.
Scenario 2 - If you used an offset account and over time you paid $400,000 into the offset, you would still be paying interest on just $100,000 as you would be in scenario 1 - but if you then drew out the $400,000 to put towards another house for owner occupation then you can claim the interest ON THE WHOLE DEBT OF $500,000 because the loan amount has not changed.
BTW I'm using capitals for emphasis, not shouting.
If you were paying 5% interest, then the interest on $400K is $20K per annum and at 37 cents in the dollar that's a tax deduction worth $7400 annually to you, so that's worth having.
Does that explain it? It's very important that you grasp this concept, it will cost you dearly if you don't.
Thanks heaps for the replies. Seems theres no black or white answer. I know im never fixing ever again its cost me alot of money. We are both contractors. Im a bit suspicious of online applications. And yes paying the loan down as quick as possible is our goal its an IP and we rent but intend on moving into the house when its paid down. Thanks again
Good luck, get that loan out of your life...
Rufus
23 Dec 2016, 01:01 PM
Let me explain.
Scenario 1 - if you pay down the loan and then redraw the extra that you have paid to buy another house then the interest cost on what you redraw IS NOT TAX DEDUCTIBLE. EG you had a $500,000 loan and you paid it down to $100,000 and then drew the $400,000 back to buy an owner occupied house, you will only be able to claim the interest on a debt of $100,000 - so you have LOST the ability to claim tax on $400,000 of your debt because you increased your loan from $100K to $500K and used the money for personal use.
Scenario 2 - If you used an offset account and over time you paid $400,000 into the offset, you would still be paying interest on just $100,000 as you would be in scenario 1 - but if you then drew out the $400,000 to put towards another house for owner occupation then you can claim the interest ON THE WHOLE DEBT OF $500,000 because the loan amount has not changed.
BTW I'm using capitals for emphasis, not shouting.
If you were paying 5% interest, then the interest on $400K is $20K per annum and at 37 cents in the dollar that's a tax deduction worth $7400 annually to you, so that's worth having.
Does that explain it? It's very important that you grasp this concept, it will cost you dearly if you don't.
Would you not just borrow on the next house?? And that would be 100% tax deductible?
We are buying a property 100% cash, it is going to be put into our holiday rental pool from day 1, cashflow from day 1, no interest at all.
Would love to do that every day of the week, but after tax, living, maintaining the properties, paying all the costs of property ownership it is not easy...
Cheer Rufus. That is the plan. The $ we are paying down are available and it needs to stay that way if we refinance. A broker i spoke to said if you draw the money back off you cant claim it on tax as you technically paid the IP loan down then used the money for something else? Doesn't seem right to me.
As Rufus points out, Offset account is worth it's weight in gold... far better and more flexible than redraw that are not obvious at first glance.
Scenario 1 - if you pay down the loan and then redraw the extra that you have paid to buy another house then the interest cost on what you redraw IS NOT TAX DEDUCTIBLE. EG you had a $500,000 loan and you paid it down to $100,000 and then drew the $400,000 back to buy an owner occupied house, you will only be able to claim the interest on a debt of $100,000 - so you have LOST the ability to claim tax on $400,000 of your debt because you increased your loan from $100K to $500K and used the money for personal use.
Scenario 2 - If you used an offset account and over time you paid $400,000 into the offset, you would still be paying interest on just $100,000 as you would be in scenario 1 - but if you then drew out the $400,000 to put towards another house for owner occupation then you can claim the interest ON THE WHOLE DEBT OF $500,000 because the loan amount has not changed.
BTW I'm using capitals for emphasis, not shouting.
If you were paying 5% interest, then the interest on $400K is $20K per annum and at 37 cents in the dollar that's a tax deduction worth $7400 annually to you, so that's worth having.
Does that explain it? It's very important that you grasp this concept, it will cost you dearly if you don't.
Great news it is an offset account setup against our loan 😊 Like you say people change their minds in life. This house was never meant to be an IP but lack of work (sunny coast) made it too hard to live there and had to move back to brisvegas. Thinking of buying a house in bisbane but paying 600k for something that still needs work done on it isnt doing it for me. I know rates are low but paying the loan out up the coast over nxt few yrs and been debt free would be a nice change. If we decide to move back to brisbane well we will buy then if prices havent gone through the roof ha ha. Its either stay in the ratrace for another 7-8 yrs or another 2 yrs and be debt free and do an easier job or commute 3 days a wk. Choices choices...
The lowest variable rate your going to get, even lower than from a broker, will be using an online lender like ubank or loans.com.au
I called a very reputable broker in nsw after being offered 3.99% variable from NAB and he almost fell off his chair, and said he couldn't match 3.99, and that was one of the best deals he had seen recently with the big four.
It hen told him, I was offered 3.59 and 3.79 with online lenders, and he basically said if you want the best rate from a major bank use a broker, but online banks have lower costs, so no broker could compete with those variable rates.
The fixed rates of the online guys don't seem all that competitive compared with the major banks, but the variable is.
The more investments you own, the greater interest you will save changing from 4.2 to 3.8 %, for me it's about 500 a month saved.
I pity the guys who swear black and blue about using major lenders because, because, because..... I'd rather save 500 a month, and use an online platform that actually works, and telephone assistance with larger availability than the major standard working hour banks.
All banks, as far as I know, offer a lower rate to new customers, and do not change or alter the rate for existing customers by the same amount, which means when the cost of lending decreases, the existing customers after 12 months wonder why they are not on the lower rate. Just have a look at how many different products the big four have, they bring out a new offer almost every time a rate drop occurs, and look at what all the old products are..... all higher- every single one. Meaning at the time you had a good deal, 6 months later down the gurgler !
The easiest way to get a cheaper deal, is ring up every 12 months, and enquire about a payout figure, they will ask why, and you just tell them I was offered such and such rate with another institute, then they will change your rate to the " current" new customer version of your product. Now you can do that with online or major lenders alike, and stay .5% below the big four all the time also.
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