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Second Mortgage & IP - What should I do?

Discussion in 'Real Estate' started by Sk3tChY, 17th Sep, 2010.

  1. Sk3tChY

    Sk3tChY Well-Known Member

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    I'm at the stage now where I'm preparing to buy my second IP and I've got a few questions that I'd really appreciate some opinions on.

    1. Should I increase my limit with my current lender or pull out a loan with a second lender?
    I'm satisfied with my current lender (ING) in terms of options and interest rate, but I read somewhere though that it's better to split your loans across different lenders, I don't really recall the reason why though. It would roughly cost me about the same to increase my limit with ING as it would to get a loan with a new lender, so I'm not too fussed in that respect either way.

    2. If I should go with another lender, any recommendation on who generally offers a good deal?
    Last time I just used Mortgage Choice to find a loan, they were pretty good, but chances are had I of done my own research I'd have probably gone with ING myself anyway at the time. If I were to go with another lender at the moment I'd be considering NAB, ANZ or Bankwest, although I'd like something with Free Redraw, not where you only get it free for Redrawing $2000.

    3. Should I stick with the basic no-frills type loans with the lowest interest rates, or are the "Investor" type loans beneficial in some way?
    I've personally always thought of them as being a little gimmicky, personally I'm fine as long as it has an IO option and a redraw facility which doesn't cost me to redraw.

    4. What are the chances of getting a platinum credit card with the fees waived if you've got a home loan with the lender?
    This isn't really all that important, but I'd like to get a platinum credit card with the annual fee waived, I think if I'm giving the lender tens of thousands of dollars it's the least they could do. I've heard stories of people getting credit cards with the annual fee waived.

    And just in advance, I understand everything you guys say will just be opinions, I know I need to take into account all my own personal circumstances etc, I'm really just after opinions on what I should do here before proceeding.
     
  2. Billv

    Billv Getting there

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    I think the platinum card has to do with your level of income. I have a platinum card but what's special with it?
    I only know of the free travel insurance.

    I can't tell you what's best for you but generally the more business you put through 1 lender the more the benefits
    (up to a certain level)
    I've got most of my loans with 1 lender and I'm getting a 0.85% discount.

    How big is your current loan and how much more are you going to borrow?
    When did you get this first loan?
    Are there loan exit fees?
    What is the current interest rate?
     
  3. Sk3tChY

    Sk3tChY Well-Known Member

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    More of a status and personal goal type thing. A lot might consider it a little silly and pointless, but it's kind of like something that says "Yeah, you've made it pretty good".

    Not bad, I'd much prefer a discount on my interest rate than a free credit card, that's for sure. Although I'm not sure I'd have borrowed enough yet.

    Current loan is under $200,000 and at the time I'd be taking out the next loan I'd be having around $100,000 left owing to the bank.

    I'd be looking to take out a further $250-350,000, depending on what I buy.

    I first got this loan around July 2008.

    Not sure what you mean by exit fees? I wouldn't be exiting this loan, I'd simply be either increasing the borrowing limit, or getting another loan from another lender.

    The current interest rate is 6.74% p.a. which is very competitive.

    I guess I could always email my current lender saying I'm considering borrowing more money and if they were to offer me a discount on the interest rate I'd be more inclined to borrow off them and see how I go?

    How did you obtain the discount on your rate? Did you ask for it, or was it offered?
     
  4. Billv

    Billv Getting there

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    Yes that's very good for a small loan
    Do they have a restriction on your LVR?
    Exit fees only become a problem if you sell or refinance the loan with another lender.
    But considering that you already pay a low interest rate there is no reason to refinance.

    I had to ask for it, but with only $250K loan they'll only give you 0.7% discount.
     
  5. Sk3tChY

    Sk3tChY Well-Known Member

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    Not entirely sure, I think most lenders these days will allow you to borrow up to 90-95% of the value of the property.

    It shouldn't really matter too much for me, by the time I decide to actually take out this extra loan, I aim to only have $100k owing on my first IP, which I'd like to think is worth about $250k now, so I should have plenty of equity to take out another $250-350k without much hassles.

    Yeah, I'm very happy with ING, their rates are always among the lowest and the loan suits me perfectly fine. I'd be more than happy to simply increase my limit with them, just I've read before that some people prefer to borrow from multiple lenders, although I forget the reason why.

    I went through a stage where I was very interested investing and investment strategies etc, which is half the reason I joined this forum and read a lot of useful information here and on another forum, somersoft I believe, most of which I've forgotten now. :( I think there might have even been a technical name for it, I think some woman who posts a lot over on somersoft made the thread.

    Well it all adds up mate, how did you get that figure of 0.7%? Even that would be great, it would save me a bit over $70 a month and even more if/when the rates rise.

    Mind you, I'd be pulling out a further $250-350k on top of my current loan of a little under $200k, so in total the loan would be between a little over $400k or a little over $500k depending on how much I decide to spend on the second place.
     
  6. Billv

    Billv Getting there

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    In the early stages when you only have 1 IP having a loan package with an offset, free credit card etc isn't very beneficial.

    With a package you pay an annual fee (almost $400) but no other fees and you also get a 0.7% discount off their standard variable which currently is around 7.5%

    Is your first mortgage for a PPOR or an IP?
    If it is a PPOR then having an offset is beneficial but you can achieve the same thing with a redraw facility.
    As long as you use the redrawn funds to purchase an IP
    the interest will be tax deductible.
    If however you'd like to use the redrawn funds to purchase your next PPOR then the offset account is a better option because it allows you to withdraw the money from the offset account without affecting the tax deductibility of your loan.

    If you don't have a PPOR then the offset account won't be very beneficial and a no frills PI loan with redraw facility can be just as useful.

    I don't know what's best for you.
    It would probably pay to discuss your situation and long term investment plans with a financial advisor specialising in property. Otherwise, your mortgage broker can see your personal circumstances and financial position and could make suggestions but I don't know if he's willing to do it because he's isn't a financial advisor.

    Disclaimer: and neither am I
     
  7. Billv

    Billv Getting there

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    I don't know which lender came up with this figure first.

    I think it's got to do with the margin between the bank's borrowing rate and the interest rate they charge us.
     
  8. Sk3tChY

    Sk3tChY Well-Known Member

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    Who is this with? I know NAB have their Choice Package where they offer you a discount, credit card etc, for an annual fee of $395.

    I've currently got Mortgage Simplifier with ING.

    I have 1 property at the moment, which I lived in for 12 month so technically it's my PPOR, however it's currently being rented out and has been for over a year now and chances are it will always be rented out, I bought it as an IP.

    This second property that I plan on buying is also going to be an IP, it will be bought and rented out immidiately, I'll continue living at home for now, I'm still only 23yrs old, so it's still acceptable for me to live at home a couple more years. :p

    Of course, I'm just after opinions and a bit of a discussion here so when I finally do go see a mortgage broker I have a good idea on what I'm after, what to talk about, what to avoid, etc.


    The 0.7% discount is this with package deals only or something?

    Like I said I've got Mortgage Simplifier currently with ING, if I just increased my limit with them to something a little over 400k-500k would they offer any discount? Or is it just these package deals only?
     
  9. Billv

    Billv Getting there

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    I'm with St George but I believe they all have a similar fee
    of $395 or there abouts

    Not necessarily, from what I know its offered with different loan types.

    I doubt it because you're already enjoying a discounted rate but you can ask
     
  10. Sk3tChY

    Sk3tChY Well-Known Member

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    Well I guess there's no harm in asking. :)

    Could someone perhaps explain the reasons why someone would possibly go with another lender in this scenario?