Refinancing investment property - Guidance needed

noslappers on 12/12/2017 - 13:02

Hi Guys

I am looking at refinancing my investment property, been with NAB for 5 years and now its matured to P&I. I want to go back to Interest only as I want to save as much money as possible for the next one.

Currently have 318K loan
valued at 500K
Offset Account with 100K
NAB currently 4.58

Ive been offered a loan with Click Loans / Pepper at 4.14% which sounds to good to be true and the only problems I see are they have a minimum monthly repayment of around $1100 as they dont reduce the payment by factoring in the funds in the attached offset account, they do however then have the difference available in a redraw facility.

Now the broker is telling me not to worry and its the exact same setup I have with NAB and I can then move the extra money from the redraw into the offset say once a month.

Does this all sound ok to everyone? As he is super slick and im not quite feeling it but we have moved onto the conditional approval stage. So I thought id ask for feedback here.

Pepper Loans – Has any one ever dealt with them? thoughts? anything I should look out for?

Thanks

Financial

Comments

  • HighAndDry on 12/12/2017 - 13:07
    +1

    they dont reduce the payment by factoring in the funds in the attached offset account, they do however then have the difference available in a redraw facility.

    I'm not a loan broker but these are NOT the same thing at all.

    Offset facility = they calculate interest on Principal less Offset. Here's Pepper Loans' own explanation:

    https://www.pepper.com.au/offset-sub-account

    Any money you have in this linked account can be used to offset the balance of your loan, which then reduces the amount of interest you are charged that month.

    I've had another think - does he mean that since it's a variable, instead of keeping money in your offset account, you use that money to repay the principal early, leaving only the balance to accrue interest - and if you need to use that money, you move that (using the redraw facility) out of the loan into whatever account.

    That's….. possible. But:

    1. If you forget to move the money back into the loan, you could pay interest calculated on a higher balance;

    2. If there are fees or charges for accessing the redraw facility, you'd have to pay those monthly; and

    3. I'm not even sure that that's how it would work without knowing more - it's just a possibility.

  • redfox1200 on 12/12/2017 - 13:34
    +4

    DO NOT move redraw money out of an investment homeloan or your tax returns are going to start getting complicated. the interest on the money you redraw will not be tax deductible.

    • robbyjones on 12/12/2017 - 16:36

      ^^^^^^^ One thousand times this. Walk away from this loan there are may more out there with similar interest rates.

  • sweefu on 12/12/2017 - 14:23

    Broker here. If you're open to fixed rates there is sharper pricing available ATM from the majors - 4.09% / 2 yr fixed / investment / interest only.

    This is general advice only, etc etc

    • burningrage on 12/12/2017 - 15:04
      +1

      Lol where have you been? I am now in my 7th month of waiting for the refinancing to go through as the result of the mother of all cockups on the NON-me side.

      Can confirm this is a good rate AND if it's true coming from majors, it would be even better!!!!

      • noslappers on 12/12/2017 - 15:35

        May I ask what happened?

        • burningrage on 12/12/2017 - 16:57

          Application started in May. Given 3 lenders to choose. Chosen one non major but well known because 8 days turnaround.

          Then for the next 4 mths, series of doc demands coming in drips and then hiatus and then the lender demands repeat of the same docs because the ones provided 4 mths ago expired so they need fresh new sets.

          Then after 4mths, told that rental income has to be in joint accounts (could have told me earlier). Another 2 mths wait. Then approval only for one property as it needs 3 mths of rental to go to joint accts.

          Cocked up the process, alerting the incumbent lender, creating panic so got inquisitioned by current lender. Raised the alert. Broker now got serious but fortunately already served 3 mths history of joint accs.

          Waited another 1 mth. Needed new sets of financials again because of time has lapsed again.

          It went that long that my rate lock expired. Lender refused to honour. Got f@@ked. Now in principal approval but not yet finalized but broker has already activated security release from incumbent lender.

          Total of 7 mths and still going. I asked the lender to show consideration. It stressed my wife, it postponed anniversary, had to turn down lucrative job offers and most of all I cannot go overseas for break because docs could be arriving soon and this is Christmas… supposedly.

      • Baghern on 12/12/2017 - 16:22

        thats not the comparative rate I bet

        if you can get all the fees knocked off, its a good rate,

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