Mortgage Advice-Stick with Small Online Lender or Switch to Big 4 Bank?

Lbarnacle on 17/01/2019 - 22:52

So, due to poor credit rating we didn’t have many options for mortgage provider when we bought our first home two years ago. We went with Plan Lending, who are linked to Advantedge and NAB. They’re pretty basic ( online only, redraw rather than offset, average rates) but we haven’t had any issues.

We are expecting to reduce our income during 2019 so we’re thinking of locking in a better deal while our income is at it’s best. I think my income will cover the mortgage, but some lenders may not see that as enough.

We are happy to revisit this in another few years when my partners future is more stable.

So my question is, is it better to have 5 years history with one lender, albeit a simple, no-frills one, or get into bed with one of the big 4 banks (Westpac is most likely option) for 2-3 years for a better appearance when refinancing in the future?

(Also note Westpac has offset, better app, credit cards, but also terrible customer service and worse variable rates)

Financial

Comments

  • dcep on 17/01/2019 - 23:21
    +2

    for a better appearance when refinancing in the future …

    wut ?

    just go for lowest rates/fees from any lender , if redraw suits you fine

    • barnacle on 18/01/2019 - 11:17

      Thanks, yes that makes sense.

  • caramellokoala on 17/01/2019 - 23:49
    +1

    Good luck refinancing in this environment with a property bought at the peak and a poor credit rating.

    I think my income will cover the mortgage, but some lenders may not see that as enough.

    You think it might? Either it does or it doesn’t. banks put buffers on incomes for a reason, unexpected expenses or a loss of income can happen at anytime. Circumventing their evaluation processes is pure idiocy. If they don’t think you can service a mortgage then they’re probably right. Think of the stress you’re going to put your family through Living on a knife edge.

    You’re better off selling and purchasing a home that is more affordable for your financial situation or renting.

    • dust on 18/01/2019 - 09:23
      +1

      Good luck refinancing in this environment with a property bought at the peak and a poor credit rating.

      Yes, especially if the property you bought was an apartment.

    • barnacle on 18/01/2019 - 11:25

      Fair points. To clarify, my salary does cover mortgage and expenses. Banks are willing to lend more than we require. Credit rating has gone from good to excellent so do have options. The knives are safely stored away. Longer term plan would be to move into larger home in a few years once the market figure itself out and both careers are stable.
      My question was ‘big 4 vs small lender’ and if there is any perception of reputation or quality of these. In my head I thought we would have more options later if we already have history with big 4. Maybe the advertising got to me!

  • JimmyF on 17/01/2019 - 23:55
    +1

    I think my income will cover the mortgage

    What could go wrong……

    We are expecting to reduce our income during 2019

    Baby? You'll be having a larger drain on the income than just the reduction in earnings.

    • barnacle on 18/01/2019 - 11:27
      +1

      Thanks Jimmy. Yep, i know all about it but it has been factored into expenses.

  • arkie0 on 18/01/2019 - 08:43
    +1

    So my question is, is it better to have 5 years history with one lender, albeit a simple, no-frills one, or get into bed with one of the big 4 banks (Westpac is most likely option) for 2-3 years for a better appearance when refinancing in the future?

    Makes no difference

  • one man clan on 18/01/2019 - 09:53
    +1

    Aside from all of the above prudent advice about circumstances, why go with the big 4? Look outside those or speak to a mortgage broker, you might get a better rate.

  • barnacle on 18/01/2019 - 11:17

    Thanks all. We just want to be in the best position to refinance in the next 3-5 years when both careers are secure and we’d like to move into a larger property. (Yes it is a growing family.)
    I thought a more established lender may look more favorable on our history. But from your comments it appears not, so we will stick with current lender with the best rate.

    • HighAndDry on 18/01/2019 - 11:51
      +2

      Also when refinancing, or financing, or anything to do with home loans, go through a mortgage broker. I'm not one, not related to any, etc, but they get preferential treatment compared to going directly with a bank - and even more, a nice or desperate one will even throw in incentives from their own commissions.

  • Ozai on 18/01/2019 - 11:19

    Should consider exit fees

  • xkcd12345 on 18/01/2019 - 13:20

    I don't think there is a point being with a big 4, especially considering your credit rating has recovered. Anyway, we were with Macquarie and had a rate of 3.65% (you can negotiate the rate slightly depending on your LVR, which will be higher since you've already paid off some of your debt?). Best thing with Macquarie was that they didn't compounded interest rate which CBA did 5 years ago when I was with them. Point being it was significantly cheaper to go with the smaller lender. Shop around to make sure your current

    Also, out of curiosity, any reason you prefer redraw over offset?

    • barnacle on 18/01/2019 - 14:38

      Thanks. I don’t prefer redraw. Plan lending don’t offer an offset account. Yeah I’ve decided that there is no advantage to big 4 as long as other requirements are met.

  • Sofie519 on 18/01/2019 - 15:43

    Best to go to a broker. Most brokers have all the products from the big 4, plus a wider broker channel of products from other lenders. Most importantly you have freedom of choice and option from a range of lenders rather than a just different product lines from one particular lender.

    Dont be caught up in the perception of 'big 4' being safer/better. If you want, just insist that the broker find you a product from a ADI lender (everyone is under same regulation and same government guarantee). The Royal commission should have opened your eyes to whether the 'Big 4' are better … There are always going to be products that put you in a better position than others at the time of application it might be with the big 4 it might not be, just be open about it.

    If you revealed what rate you are on (or will be on, if intro rate is about to expire), what LVR you are looking to borrow you might get fellow members to suggest if you are already on something reasonable, and whether it's worth the change. I would also hold some concern over your past 'poor credit', you might think it has improved, but the cause may still show up on file. Also bear in mind what the lender may have offered to lend to you 2 years ago, may not be the same now due to the tighter policies on how your income and expenses are considered as well a their increased assessment rates.

  • mortgagebroker on 18/01/2019 - 22:17
    +1

    I would be more concerned about your credit report looking good. Planlend would not have given you the loan if it was bad.
    Advantedge (your lender) is owned by NAB. It is part of the big 4.
    It will not give you more options later changing to a big 4 bank.

    Advantedge is one of my favourite lenders. If your rate is under 4% sit tight and be happy :)

    • barnacle on 18/01/2019 - 22:41

      Thanks mortgagebroker.

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