just wondering how easy or difficult is it to refinance a homeloan

Hi Guys,

just wondering how easy or difficult is it to refinance a homeloan.

We are currently planning to purchase our ppor using the bankwest ratetracker home loan product. the 2 year variable interest rates on this product is 1% below the avg of the standart variable rates of the big 4 e.g. currently its 6.38%. After 2 years it the rate defaults to the standard variable rate for the product which is currently 7.18%.

6.38% is currently the lowest on the market ( upfront fee of $950 but no ongoing fees, 100% offset, flexi payments, redraw facility etc). There is a $600 exit fee. We have had a look around and though there are better standard variable rates out there, the 2 year low rate is one of the best on the market.

We were thinking of taking this loan and then refinancing after 2 years with another lender, when the interest rate increases to bankwest std variable. the $600 exit fee is not much compared over the long run saved on a lower interest rate with another lender. and yes this will be just a one off exercise, we don't plan on refinancing every few years !

As this is our first purchase was hoping for some advise on the feasibility of this. Or to point out flaws or risks with the plan.

cheers

 

Moving lenders is very easy these days but apart from the exit fee there could also be an application fee, valuation fee and other small costs.

You could go with bankwest and then ask them for a better rate when the loan switches over to standard variable.

How big is the loan?
Most lenders will give you 0.7% off

 

the loan is for 380K of a 480K value property.

Nab is offering 0.7% of their std variable of 7.24 with 395$ yearly fee = 6.54

Commbank is offering 06% off theri std variable of 7.34 with 350$ pa fee = 6.74

Bankwest offer a discount only above 500K loan. their std variable is 7.18.

I bank with commonwealth ( credit card, transaction acc etc ), I spoke to a lending agent at the local branch, asking if they would match NABs discounted rate, they said no. well i take all my business over

 

I'd probably do the same.
Banks aren't doing the right thing by their customers so why should we be loyal to them?

 

I hope you have moved on this because Bankwest have just pulled their Rate Tracker product off the market.
It was a good product for the first 2 years and then you look to swap out.

At an LVR just under 80%, you may get 6.55% with no fees but it will be the overall cost and flexibility that matters.

I would suggest call a good broker and get them to do the work and comparisons for you. Then do a separate check yourself on Cannex to make sure the comparisons are legitimate.
Good luck
Greg

 

Hi,

I'm probably a little late throwing my 2c in the ring as GregR has said the product has been pulled but for future reference if you do decide to go down a similar path that you were discussing a couple of things to be aware of:

1. Any exit clauses the bank has on the product. Often with these products with a honeymoon rate there is a clause about staying in the product for a certain period of time otherwise you are charged a fee based on the outstanding loan amount. I was burned by this with my loan that was on a honeymoon rate and then when I refinanced after the honeymoon rate finished I was slugged with a significant fee that basically wiped out an entire years worth of repayments. The honeymoon rate lasted 1 year but I was essentially locked in for 4 years before I could avoid being charged a penalty. So read all the fine print regarding exit fees and then re-read them, and then ask your partner to read them as well. I can't stress this enough, especially after how I was burned.

2. Also, be aware of application fees of the product you are moving to. It looks like you will avoid the big one of mortgage insurance but there are a few others that are also thrown in for good measure such as mortgage document registration fees. For more detail on additional fees most banks have online calculators that can show you the associated costs as a starting point.

Well, hope that helps. Good luck.