Personal loan to buy a house (Citibank)

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Citibank Australia

• 

  Malarkey on 18/08/2014 - 14:51

  Assuming you can repay $60,000 + interest in 2 years + minimum repayments on the $140,000 house loan?

  • 

    ycon on 18/08/2014 - 15:05

    Yes- should be able to cover the personal load in 2 years without drama.

    $140k @ 4.65% is $790 per month (over 25 years)

    60k @ 2.9% is $2,576 per month (over 2 years)

    IE: First 2 years would be $3366 per month

    I can't quite understand whether or not it's worth taking the personal loan- does it save much?

    • 

      Malarkey on 18/08/2014 - 15:26

      You've almost answered your own question, ignore the 140k aspect of the loan and compare 60k at 2.9% and 4.6%

      60k @ 2.9% is $2,576 per month (over 2 years)
      = total interest $1829
      60k @ 4.65% is $2,622 per month (over 2 years)
      = total interest $2949

      So over 2 years it will save you about $1100 in interest. I personally wouldn't like having a 60k personal loan over my head for that kind of saving.

      • 

        donga100 on 18/08/2014 - 15:57

        It's even less saving than that for a couple of reasons:

        • The 2.9% only apllies to the first $48k, the rest is charged at 19% interest.
        • Regular repayments are required so your balance gradually reduces over the 2 years.

        When I did the maths on my own circumstances it wasn't worth it.

    • 

      [Deactivated] on 18/08/2014 - 15:32

      +1

      Also will depend if Citibank will give you the full $60k credit line (it's 5k-60k) if you have a $140k mortgage. Or vice versa if you get $60k from Citibank first.

      • 

        Malarkey on 18/08/2014 - 15:47

        haha I was going to mention that, but I assumed he had decent income since he can afford $3.3k/month on a single income.

• 

  aggregate on 18/08/2014 - 15:59

  +3

  Talk to Citibank/broker first.

  Banks have more stringent rules in place for small properties. Depending on the size of the apartment, you may not be able to get a mortgage at all.

  Even if this is feasible, the bank will be concerned about your ability to service the debt (their assessment is different to your actual ability to repay the loan).

  Principle + interest repayment on a $200k loan is $1129 per month, compared to your $3366 repayment (which is equivalent to the repayment for a $600k loan @ 4.65%)

  • 

    ycon on 18/08/2014 - 21:14

    That's interesting and surprising. I'm looking at tiny places (like 25-40sqm)

• 

  ycon on 18/08/2014 - 21:16

  So it looks like it really isn't worth going the personal loan.

  But what if the interest rates were to rise-at least I've got 30% of it locked in at a low price?

  Also-Would it help if I got my folks to gaurentour the loan? I would never take a cent from them but if it helped me convince the banks of do it.

  • 

    [Deactivated] on 19/08/2014 - 07:17

    Are your folks in a position to pay the mortgage without burden should something unexpected go wrong?
    You might not mean for them to have to pay a cent, but they can still be left holding the bag.

• 

  jlien on 19/08/2014 - 11:23

  +1

  Any reason you can't just borrow the full 200k on your mortgage, then the 60k on your personal loan, then place the 60k into the offset, drawing from that each month to pay off the personal loan?

  Seems like the least stressful way of doing it to me, having the money in the offset seems a safer play than having it locked up in equity in case things go awry.

  Most banks do not like lending to such small places, you'll need to shop around.