Background
A friend of mine is an empty-nester and she's bought a property to downsize into. She is looking at owner-occupier home loan options. She has around 50% deposit, but would like 80% LVR to retain some of her savings. She is earning low six-figures, but would eventually like to retire, generating income from her small business, and renting out the (large) family home, ideally by renting out individual rooms. She also has an investment property.
She isn't keen on refinancing, so I have tried to find her loans with the lowest monthly repayments + fees, and have come up with the following shortlist via Canstar:
Redraw Only
• Bank Australia (4.24% – Basic Home Loan Special)
• HSBC (4.34% – Home Value Loan)
Offset
• Northern Inland Credit Union (4.24% – Dream Value Home Loan)
• Tic:Toc (Variable – 4.49%)
• Bank Australia (4.44% – Premium Home Loan Package Special)
• HSBC (4.44% – Standard Variable Rate Home Loan)
Questions
• Go with a smaller lender (e.g. Northern Inland CU)?
• Pay extra for offset account? (at least $10k over the lifetime of the loan if with Northern Inland) Or just opt for redraw-only and go with Bank Australia/HSBC?
• Also, does anyone have experience with renting out individual rooms of a large property?
I would appreciate any thoughts or advice.
Only if you're satisfied with all features and criteria offered?
If you're asking what's the difference between big & small lender with all numbers / features / service being equal,
then the only thing i can think of is small lenders have shorter contract for their wholesale funding so any liquidity/credit crisis like 08 will see them hiking rates faster than big lenders despite central bank stay put.
If you're sure it's a forever PPOR and won't turn into IP in future (not even thinking of renting out part rooms whilst living there), then you can consider forgoing offset account for basic free instant redraws, else there will be tax implications.
$10k over lifetime of loan is nothing at all. Interest rates quoted are not fixed for life.
6 months out, Northern could be 5.5% whilst other could be 4.5% or vice versa. That's your problem of looking for a "long-term homeloan" aka the lazy tax on refusing the hassle of refinancing.
Talk with mortgage broker or financial planner.