Advice Required for Home Loan Re-Financing

Alki87 on 27/04/2020 - 16:47
Last edited 11/05/2020 - 13:36 by 2 other users

Hi All,

I am on the market for re-financing and cannot understand few things as I cannot find any comprehensive calculators.

My current situation:

CBA Variable at 3.03% with package (100% offset account)
Property value: approx $630k.
Loan balance: $480 (LVR 75% approx).
Saving in offset account: $90k and + $3-$5k every month.

Re-financing offer I have received:

  1. Entire $480k in variable at 2.84% with package (100% offset)
  2. Split $300k in fixed at 2.19% and $180k in variable at 2.84% (100% offset for variable only).

All mortgage brokers I spoke recommended to have split home loan ($300k in Fixed $180k in variable) and get it reviewed every 1-2 years. I was told this will save in interest. From what I can calculate, having $300k in fixed with no offset will cost more interests than having entire $480k in variable with 100% offset because I can get full benefit of offset with 100% variable whereas I will only be able to get the benefit up to $180k.

Would anyone please help me understating this? Your insight will be appreciated!

Financial Home Loan

Comments

  • Amaris on 27/04/2020 - 16:55

    Looks like a good offer. Who is it with?

    • Alki87 on 27/04/2020 - 20:39
      +1

      It’s with ANZ.

  • Ash-Say on 27/04/2020 - 16:59

    Looks like ANZ offer. If yes, 2.84% is high. I am sitting at 2.74 for the same balance.

    • Alki87 on 27/04/2020 - 20:41

      Thanks for sharing that. Did you get your loan with ANZ directly or through a broker? Also, did you get the 4k rebate? Thanks.

      • Ash-Say on 27/04/2020 - 23:08
        +1

        I am existing customer and directly spoke with their home loan customer service team.

        If you want to use offset, I will suggest doing $300k for 2.19%( 2 years fixed) and rest at 1 year fixed for 2.39%. With latter fixed, you can still keep 100% offset account and enjoy much better rate. These rates are listed on their website so you don't even need to negotiate.

        • Alki87 on 27/04/2020 - 23:17

          OMG, I’ve never considered getting 2fixed as I wanted offset facility and now what you suggested looks amazing!! Thank you heaps!

        • cantthinkofone on 28/04/2020 - 15:18

          ah this is pretty smart. I'm in the process of applying for a split loan now as well but I can't do this, CBA doesn't have offset against their 1 year fixed like ANZ does.

  • robbyjones on 27/04/2020 - 17:05
    +4

    If you have $90K savings and adding max $5K per month means that it would take you 18 months to reach the $180k variable loan amount and it is at this point you will be worse off. The suggestion by your mortgage broker is valid. You will be approximately $3000 better off at the end of the 18 months versus having all $480k in variable.

    • kurovon on 27/04/2020 - 17:47
      +1

      This is correct. Sometimes the PDS allows a limited extra repayments to go towards the fixed portion; can range between extra $499-999/month without incurring penalties.
      You could try splitting the portions differently i.e. $280k fixed & $200k variable if you want to remain committed to regularly saving up your offset balance and taking advantage of the rates. Use a spreadsheet to find your happy medium.
      What I did before was as soon as I hit the offset amount, I would put aside another 3 months expenses and used any extra earnings from there onwards for riskier investments knowing that I've optimised my mortgage repayments. And with mortgage rates at <3%, I reckon I would have felt comfortable to go and make returns of 4%+
      In hindsight now it's turning out to have been the wrong decision…

      • Alki87 on 27/04/2020 - 23:22

        Thanks for the suggestion, I might need to do some more calculation and find the good spot for the split amount. I assume the extra you saved went to share market, hope it gets back soon!

      • cantthinkofone on 28/04/2020 - 15:57

        OP, why not fix a bigger amount and float less (ie. variable closer to the 90k you currently have in savings)

        Eg. Fix 380k at 2.19% and float 100k at whatever the standard rate is. then you pay almost no interest on the variable portion, in a few months when you've saved 100k total you just pay off your principal.

    • Alki87 on 27/04/2020 - 20:42

      Thank you!

  • Help on 27/04/2020 - 17:13
    +1

    Option 2 is better assuming no change in your income

    • Alki87 on 27/04/2020 - 20:42

      Thanks!

  • kunimitsu on 27/04/2020 - 20:28

    So how much do you have in saving?? Do you have the whole loan amount in saving(480k)?

    How will fixing 300k and 180k in variable save less interest then 480k variable assuming you have 90k???

    • Alki87 on 27/04/2020 - 20:45

      I have 90k sitting in the offset account now. I ran a calculator and it seems the estimated saving the calculator showed was larger amount as this is for the life of the loan over 27years.

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