Here is my intrusive thought of the day:
I have $35k left in my mortgage and the interest on that mortgage (from ING Bank) is 7.45%. I have tried calling them and ask to have the rates lowered but they refused due to the low amount I have remaining; and I don't think any bank would re-mortgage only $35k.
Some personal loans are offered at a rate of just over 6%. Is it worth getting that personal loan of $35k to pay off the mortgage at a lower interest rate?
Depends on where the personal loan is from - some places are wholly fee-free while some have an establishment fee.
This is just me thinking out loud. I will be talking to a mortgage broker about a change in the title of my apartment (from a joint mortgage to one that's just under my name) so I'll bring this up as well - but I didn't think any bank would be interested in taking on a $35k mortgage for less than 7% anyway.
Anyone offering low rate personal loans is making up the difference via establishment fees
Or early payout fees
.
Make sure you check for stamp duty issues if changing title. Can be messy
I'd talk to a broker and ask them if they think it's worth it to get a loan or try some banks to see who might be willing to take you on at a reduced interest rate rather than OzBargain, but hey, that's just me. In saying that, It'll be hard to find a home loan under low 6% rates anyway.
Agree with this. Use a broker. They do sometimes come up with good deals.
It would save you $1.50 a day. What's your time worth?
this is ozbargain, $1.50 a day for 7 days buys you…24 chicken nuggets at mcdonalds with 55cents left over
True. But also need to consider any costs to discharge the mortgage and store property deeds ongoing. Might be most cost effective to leave the loan open with a full offset.
store property deeds ongoing
Someone told me that no longer occurs (in SA at least. Deeds are now electronic?).
It came up when I mentioned it as one of my reasons for not closing out my fully offset mortgage.
The other reason being, it's a highly convenient rainy day "loan" option.
24 nuggets
Where do I sign
Next to extended warranty
Greasy thumb print goes where?
What about extra sauce cost?
Can't wait for the next $2 cashback deal to top the homepage for 3 days
Taking into consideration how chaotic interest rate is and taking into consideration you only have 35k on the mortgage left, I would follow your intrusive thoughts.
At least I wouldn't risk losing my home to the bank because things went sideways with folks paying thousands of dollars more because of the interest rate drama, it is not a matter of if but when.
Sure, I still need to pay out the 35k personal loan but I see it lighter.
I am not saying you should take it less seriously, their weight are different imo.
But that is just me. Better seek a professional advice.
Where do you keep your savings? Do you have an offset acct that you could add your savings to?
I believe some banks will do home loans for as little as $10k. The other option is to refinance with a cash out mortgage and collect a few $k bonus. Just tell them you want the extra funds for renovations and a new car. Don't mention anything about going to the casino.
This is what I did with St George to get the $6k refinance cashback and a lower rate last year.
Refinanced for $250k and as soon as the loan settled I put the leftover straight into the offset account.
They didn't ask me what I would be using the funds for but maybe the loans officer filled out that bit of paperwork for me.
I'd rather smash the mortgage and have it paid off quickly, rather than this personal loan thing that doesn't even save you a cup of coffee a day.
It's likely you'll incur fees for setting up the personal loan and other fees to discharge the existing mortgage.
Both those fees might make up the 1.5%-ish difference in rates you're trying to save.
Take $250k out of the redraw, refinance for the vest deal with offset, collect a cashback, then pay the $250k into the new offset.
If you're doing this, you'll either need an interest-only loan, where your required repayment each month is only the interest charged, or be prepared to make repayments on the full $285k and not just the $35k you refinanced. Alternatively, make a lump sum reduction of $250k back into the loan and ask to have your repayments recalculated on the remaining balance only. You won't have access to the lump sum repaid but you won't be making payments on it either.
If you have no upkeep fees for the loan you don't actually need to discharge it once you have paid off the loan, you can just leave it there for emergency redraw.
1.5% difference in interest rates.
What are the fees?
What is the timeframe to pay out the remainder on the mortgage?
What is the ACTUAL saving to be made here?
This sounds like someone just trying to needlessly complicate their lives for no reason.
The amount you would possibly save over a couple of years from doing this madness is negated if you choose to cancel takeaway night 3 times in the same timeframe.
I looked into this recently and I believe it's well worth it if there are no fees, you can pay it off early if you want, and if they offer a bonus, for example some banks have offered a $350 bonus to some customers recently. You don't necessarily have to pay off the mortgage but can keep the funds in an offset account and then close the loan when (if) interest rates decrease as it would then make the personal loan less worthwhile. Note you have to provide evidence of income, I believe with ING it's a minimum of $36k income although others may be lower such as Revolut.
WTF , if you have a balance of 35K on your mortgage its costing you about $2600 a year in interest well below most market rental rates, just pay down your balance and appreciate you are in a priveleged position with a small debt load.
Yep just get a second job and smash it out in no time. bonus is too busy and will have no time to check ozb therefore more saving in pocket
priveleged (sic) position
Lol, or maybe op has just worked hard and purchased a place within their means. Everything is "privilege" these days.
Jesus christ.
@brendanm: yes JFC brothaaaa it was abit long winded but hopefully I got my point accross
have a good night :) peace
Holy perpetual victim mindset Batman!
Really sums up why the world is falling apart…
@HelpMeiCantSee: righto…Tell me how understanding and acknowdgement that we all have different starting points, and that expressing gratitude is "Perpetual victim mindset"..causing the "World to fall apart" exactly.
maybe op has just worked hard and purchased a place within their means.
Everyone is working hard. To say they aren't is to not understand the current economic climate.
Plenty of people with full-time employment are on the verge of homelessness.
Everyone is working hard
Blatantly incorrect.
@brendanm: I agree with you m8, not EVERYONE works hard, some people (actually a significant amount of people) in this society do sweet FA. But as always not everyone's output is equal. Some work hard and achieve nothing, some do nothing and have everything. Generally speaking the harder you work (or more sacrifices you make) the better the outcome, but you always will find some examples where the system works against you no matter how much effort you put in.
Wtf man. Your assumption has literally nothing to do with OP. Grow up sookypants!
I'm tipping they spent more time working hard than they did comparing their situation to other people and complaining about how much more someone else had.
Personal loan at 6%? wow my car finance is 6.4 not sure how you can get a personal loan for such a low %
Some Nigerian prince offered those low rates…
I'd either pay down that remaining $35K, or refinance elsewhere. Going with a bank that offers cashback & better rates (e.g. RAMS), you can open a new mortgage of $250K, with actual borrowing of $35K less remaining cashback after fees.
A) you aren't going to be getting a personal loan at 6%
B) even if you did, there would be "establishment fees", "account keeping fees", "early payout fees" etc.
C) just pay your loan off faster if you want to pay less interest.
D) it's a massive amount of effort for low gain.
is 7.45%.
isn't this too high ? how did you end up with this ?
yeah my thoughts too, maybe they had a permanently variable rate homeloan.
I have 100% variable rate but it is at 6.33%
It's ING. They trick new customer with low rate and keep increasing the "official" variable rate afterwards. The only way to escape it is to refinance.
Why the urge to close off your mortgage account?
Depends on multiple factors.
How many repayments are left before the mortgage is payed off. Calculate the total interest on those repayments owing over that time period.
The mortgage is weighed against the value of your home. Is this an investment or place of residence.
How are you going to service the personal loan, all fees and costs involved. Even if interest is lower it could end up costing more when you take everything else into account.
You need to look at all the variables and see if its financially beneficial.
Cash advance from CC then apply for another CC for interest free period
Just don’t spend on the new CC. Rinse and repeat until you’ve paid the loan off
Cash advances aren't fee free. Just sayin'.
Never said it was fee free. Just sayin
Depending on the bank it’s going to be much less then any other ideas posted so far
Doubt it. Churn through CC's & stuff up future applications for CC down the track. Hardly worth it.
Personally, I'd be refinancing for 80% of the valuation and have a nice plump offset account. But not everyone likes to be cashed up and up to eye balls in debt.
Does the bank allow you to do that? For example, if you have $100K loan left in the balance, and the valuation of the property is $1M, can you refinance and get another $800K loan and get the $700K in cash?
Yeah why not?
Banks love money.
They make money off any Interest you pay and they make money off any Offset amount you have "invested" with them!
I've done this regularly in the past, but I notice now they ask a lot more questions when you inquire about a loan.
e.g. they ask for address, give you an approximate valuation, ask how much you have owing, and if you ask for more than the amount owing on existing loan, they ask what for!!?? Oh, and they say you cannot use it for restorations. They must think you might destroy the property they will hold the mortgage on. :)
I'll find out soon if I can just say "just in case I need it".
I had no problems refinancing a loan that had next to nothing owing. The cash out was less than land value and I told them it was for renovations and a new car. Once the $4k bonus was in my account I paid all the money back.
@JIMB0: When was this? I know they getting more and more strict over time.
When i first refinance, they didnt need a reason. Last time, I had to justify what the funds will be used for.
Hodl at all costs.
Smash it out and pay it off as fast as you can. Seeking refinance opens an opportunity for the lenders/broker's to claw more money by brainwashing you into investing etc.
Stooz it. Get a credit card with 0% on purchases & put all your expenses on it & 100% of your income onto your loan.
Then after the 12 month interest free period ends, balance transfer to another card with 0% interest on balance transfers (may be a 1% BT fee)
That's a dangerous game if you're not careful you get indebted at 23%
The key is to not actually finalise the mortgage. Just pay it ahead & if you end up not being able to balance transfer, just redraw on the loan. I use this method to keep about a year ahead on repayments. Saves me ~$1500 a year on interest at my current rate.
Some personal loans are offered at a rate of just over 6%
Nope.
This. Not going to happen.
If you're financially responsible person and have a decent enough income, talk to a broker to refinance with an offset and get 100K or 200K out on your home at a lower interest rate. Dump that cash in the offset and set the offset as direct debit for the monthly loan repayment. Don't touch that money at any cost. Keep contributing to the offset as if you're paying off the $35K. You will only be charged interest on 35K or whatever is the net outstanding (Loan minus offset). Go with a bank that gives you a cashback so it covers the cost of moving banks.
Is your 6% personal loan wholly fee-free?