Advice on Refinancing Home Loan

Hello Ozbargainers,

Just needed some advice on choosing the right lender for refinancing.
My house is now worth/valued at 700k and I owe 530K on the loan.
I would like to borrow 560K in-order to consolidate some debts, which still doesnt go into the LMI category.
With my situation of 80%, I have lot of lenders as options, so really confused who to go with

Current Lender:

Commbank - 4.55% on variable (20%) and 4.94% on fixed (80 %). yearly fee is $400
Break cost comes up to 5000 dollars

I have considered Macquarie bank as my option now, but not confident.

I have also created a poll for options in regards to breaking the loan

Thanks everyone

Poll Options

  • 22
    Go 100% variable - Rates will go down
  • 13
    80 % Fixed and 20 % variable - Good time to fix

Comments

  •  

    Can I get this right? You are proposing to expose yourself to break costs of up to $5k to essentially borrow $30k?

    •  

      Hi there

      No, i am only breaking the fixed to get a better rate.

      In 2 years I save 3 to 4 K if I pay lesser rate anyways.

      • +1 vote

        how long do you have left on your fixed rate term currently? (I assume 2 years according to you post) So save 3-4 K but incur 5K break fee. Seems like a bargain to me

        •  

          Hi thechemist,

          Yeah 2 years

          As I move to another bank I go in to variable at 3.86 which .75% lesser

          And fixed is .85% lesser

  • +5 votes

    Go see a broker, we used Naritas they were pretty good. $5K break costs is ridiculous and i'd check that because it doesn't sound right to me.

    •  

      Thanks.

      I went to Mortage Choice and they are suggesting Macquarie.

      I am not sure if they are biased as apparently loan is stamped as Mortagage choice but in Macquarie

      •  

        I refinanced recently through Mortgage Choice and I am currently on 3.79% variable through CUA, It was 3.69% with 0.20% discount for 2 years but now its up 0.10% after the recent hike a month ago. Coming from NAB at 4.84% on 90% fixed for 2 years. NAB retention offered me 3.94% variable before the changeover but I just couldn't be bothered.

        No Offset account though but debit card is fee free banking and pretty much uses what NAB network is. Although our situations might differ, I was just after the lower rate after paying .

  •  

    Might be a typo, 5000 instead of 500.

  •  

    Always expensive to break a fixed loan be it fully fixed or partly, which is why there is a high break costs for the OP. Agree with the others to find a good unbiased broker who can assess your current situation and work out options/deals for you. Costs you nothing for initial consultation with most brokers/lenders except pressurized sell which you can always escape from.

    •  

      Thanks.

      I went to Mortage Choice and they are suggesting Macquarie.

      I am not sure if they are biased as apparently loan is stamped as Mortagage choice but in Macquarie.

    •  

      not all the time as if interest rates are increasing significantly the banks are happy for you to quit your fixed rate for very low break cost as they can redeploy your amount which they have got hold of cheaply and lend it to someone else for a higher rate.

  •  

    Go see a mortgages broker. (Many will come to your house.)

    That interest rate is very high. My loan is only $300k (originally borrowed $330k) and interest rate is 4.07% (also CommBank)

    Generally, the higher the loan amount the lower the interest.

    •  

      well, before op go ahead and listens to BensonP regarding negotiations with bank tomatch 4.07%, is ur one P&I or Interest only?. I know P&I is atm significantly lower than interest only, hence explains the discrepancy

  • +5 votes

    why don't you just increase your loan with the current lender and refinance when the fixed period expires?

    •  

      Okay, I have increased it with my lender. There is no problem there.

      But interest rate is too high.

      If I refinance I save 3 to 4 K in 2 years

      • +1 vote

        Generally speaking 2 years is far too long a recoup period. Speaking as credit advisers we'd typically be aiming for 3-9 months (as a high end max) as the recoup period.

        Considering you could quite easily get $1500-2500 as a rebate to cover switching costs, such a period is realistic considering there are rates in the 3.6x%p.a. range these days. Please feel free to send us a PM or use cost recoup calculator located on our website if you wanted to run some scenarios

        Hope this helps.

  • +1 vote

    Your fixed rate is far too high - my broker has just offered 4.69% for 2-year fixed CBA on a loan of similar size - this is for investment loan, interest-only and I am a foreign resident not paid in AUD. You should be getting lower than this 4.69% at a bare minimum, and even more so for principal + interest or if you are an owner-occupier.

    Do what other people are advising and find yourself an independent broker. You are not paying them as they are commissioned by the banks.

    As of time of me posting this, with all of the out-of-cycle interest rates in the last few months, the RBA keeping a close eye on property prices not skyrocketing any further and the US Fed aiming to increase rates which likely will have a knock-on effect on our rates here, I really cannot understand why 4 out of 5 people are saying variable rates will go down…

    I would only be fixing if the fixed rate was equal to or lower than variable from day 1 (which again is what I have been offered and what I will be doing when the property settles in a few weeks).

    •  

      Thanks

      Macquarie offers - 3 years fixed at 4.09%

      And variable right now is 3.86

      What do you reckon I should do?

      •  

        These are much better numbers. I think both variable and fixed are OK decisions here.

        3 years is quite a decent amount of time to fix - it is fairly likely that the interest rate will go up at least once by 0.25% in that time frame, and almost guaranteed Macquarie rate will then be 4.11% or higher. On that basis, I would likely fix - however it does mean you will be paying about $1,300 a year more compared to current variable rate.

        I am happy to hear ideas from anyone who thinks cash rates will drop further (and that the banks will pass on these drops to their home loans), but I think it is extremely unlikely. Can see more people are still voting that variable rates will go down…

  •  

    How long is your loan fixed for?

  • +3 votes

    I think you should go variable. Not because I think interest rates will go down, but because if it's fixed, you can only pay an extra $10k a year.

    Last year I paid an extra 30k off my mortgage due to being standard variable.

    • +2 votes

      Always go variable. You are better off 87 percent of the time.

    •  

      well, you can negate the 10k a year repayment limitation by setting up a split loan. Unless you win a lottery or suddenly get an inheritance, you can forecast how much you will put into fix component and adjust ur split component according to that .. repayment is not a limitation of fixed rate.

    •  

      Why not just put it into offset rather than pay it off? Only advantage i can see is lowering of your monthly repayments. Considering you were able to save $30k (assuming), means your earning power considerably more than your repayments.

  • +4 votes

    Go to your bank first, and say you're not happy with what you are getting, and that you're considering moving. They may very well come back with a better deal, with no break cost…. In 2.5 years do a review again.

    •  

      Great advice. Thanks

      • +1 vote

        No problem. I did something similar - even went to the trouble of starting to arrange the new loan - but at the same time contacted my bank (ANZ). Got a letter of apology and an immediate rate cut! Wish I'd done it sooner…. ;-)

        By the way, probably helps to do your homework ie "if I move to bank XYZ it will cost $nn and I will save $yy, even taking into account your ludicrous break cost, as their rates are %x.x compared to yours. Please tell me why I should stay…." Be pleasant, not aggressive, this is a business decision after all.

  •  

    How much on your variable rate and fixed rate?

  •  

    I re-financed our loans in Jan from WBC to ME on the same rate as what you have been quoted: Fixed 4.09% and Variable 3.89% except I used Aussie Home Loans. Go back to your existing bank to see what their counter offer is and then compare overall cost. WBC was keen to keep me but they couldn't match my ME offer. Another possibility is keep your existing fixed loan given the $5k break fee and re-finance the variable component. I agree with ninjawarrior - interest rate in Oz has been creeping up and likely to continue going up given pending rate rises in US and increasing funding cost affecting the banks. Remember, banks can increase their rates even if the RBA maintain the official rates.

  • +2 votes

    Negotiate with your current bank first.
    Sometimes banks offer you good rate. Once they have your business, they increase the rate.

  •  

    give http://www.loans.com.au a go

    3.72% OCC with 100% offset account. The offset is with Westpac and you also get debit card. The loan is not managed by Westpac though. No annual/monthly package fees. Thing I like with them is you can have a chat to their rep on live chat to answer any questions you have. You can also email/tell them your financials and situation and they will come back to let you know how much you can borrow.

  •  

    I was gonna say go into your bank and discuss a better deal!

  • +1 vote

    Call a broker, they don't charge you and get you the best deal

    • -1 vote

      Please don't be fooled.. I think most brokers get a % of your rate paid to them yearly. E.g broker negotiates a rate of 4.01 with bank and in return broker gets paid 0.01 per year. Without the broker if your good enough/lucky enough you can get 4.00.On the other hand brokers can at times get you a better rate then you could get yourself.

  •  

    Have a look at the best rates around, but talk to your bank to see if they'll match it before changing. They won't match the lower rate exactly, but you'll save a lot of time & paperwork (and also $5,000 in break costs) if it works out.

    You should be able to find interest rates less than 4%. We recently re-financed with St George for 3.95% fixed, and they gave $1,000 cash to help with break/set-up costs. HSBC also has owner occupier rates of 3.7%. I heard Suncorp has owner occupier rates around 3.75% too. Good luck!

  •  

    Whatever you do don't go to Uno home loans who pretend to have the best home loan rate

    http://www.afr.com/business/banking-and-finance/financial-se...

  • +1 vote

    You probably should speak to a broker

    HOWEVER ill give you my option

    i wouldnt pay the 5k you might as well sit tight for 2 years if you ask me - i'd also never deal with CBA (when it comes to loans) they are the worst bank along with westpac in Australia IMO if you want to buy a house.

    The way i see it no one knows if interest rates will go up down or stay the same but you do know one thing if you break this contact it will cost you 5k you might as well wait out the 2 years and then switch to a far cheaper rate then at least you know you are 5k better off where as if you switch and interest rates go up you might end up losing more money out of it.

    •  

      Thanks, but comparing to the rates i m paying now.

      If I switch a fix it at a lesser rate, I get the break costs back in a years time.

      •  

        Yea that is fair enough you have to do what works with you hence the 'speak to a broker' part but I just reckon 5k break fee is a load of bullshit i'd try negotiate a better rate 1st at the very least.

        I don't understand why anyone banks with CBA they are criminals and do all sorts of shady shit to make a buck.

        Crunch the numbers and do what works out better just make sure you crunch the numbers factoring at least 3 interest rate rises.

  •  

    Really the bigger qn is your ability to pay down ahead of minimum repayments moving forward. If likely to be great stick with variable.

  •  

    I would be careful using a broker to facilitate a loan.
    It makes it far more difficult in the future to negotiate with your lender for a better deal, because of commission arrangements.
    At this point in time I would stick with variable unless a great fixed rate came along.

  •  

    If you are looking at any break costs, discuss and negotiate with your broker to help cover a proportion of the associated costs - they will be receiving a commission with trailing most likely. Had a similar situation a few years back, the new lender/bank covered ~25% (promotion at the time) whilst the broker covered the remaining to switch (2 mortgages; primary+investment) … note some brokers won't part take but worth a try!

  •  

    Why not just contact CBA and say you are looking at refinancing and what can they offer to keep your business.

    Helps to find some competitors rates for similar products. i.e. they won't match an online lender vs a full service product

    Brokers can't get better rates than you can get yourself if you just ask for better pricing.

  •  

    Wow.. Lots of great advice. Thanks a lot everyone.

    World is full of good ppl who are willing to spend their time to help others.

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