Paying 12% interest rate Help

Any general questions you might have in regards to loans and finance.
DeeO
Posts: 6
Joined: Mon Mar 15, 2010 11:06 pm

Paying 12% interest rate Help

Postby DeeO » Fri Nov 26, 2010 8:33 pm

Hi
My husband and I are self employed and so refinanced 2 years ago with PEPPER HOME LOANS at the time the interest rate on our loan was 8.5% ( other loans were about 7.5%)
then the Global economic crisis hit and Pepper wouldnt drop their interest rates, all other loans rates were going down and I think we were lucky to get 0.5 % drop over the whole time.
We tried to refinance (even thought they have a $12000 exit fee) but banks valued the house $90000 under what it was valued at previously.

Well....as soon as the rates started going up...so did Peppers rates....we are now paying 12% we are paying $4100 per month on 400,000 mortgage.

The interesting thing is on their website they boast a modest 9.49% for new customers.
My question to you
Can I ask them to drop the rate have you heard of anyone doing this before.

I will be refinancing as soon as the 3 years are up (10 months to go on a 3 year contract)
Thanks
Dee

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Paying 12% interest rate Help

Postby Otto Dargan » Sat Nov 27, 2010 7:24 am

Hi Dee,

Yes you can put in a request for Pepper to review your rate however to do this they may internally refinance your loan into the new, cheaper, loan they have. If they do this then the exit fees will be renewed and will continue for another three years from today!

So refinancing out of Pepper is the better option. I would recommend that you prepare to refinance by fixing up anything with your situation that may make it hard for you to get a loan in ten months time.

In particular try to do the following:
  • Pay any defaults / bad credit that you have. If possible try to get the defaults removed using a credit repair service. The banks are very conservative with bad credit at the moment.
  • Make all of your payments on time, every time, no exceptions. One missed payment can be enough to stop you from refinancing.
  • Low doc loans are going to be very different from January onwards. You will need BAS, Bank Statements or an Accountant's Letter to verify your income. Alternatively if this coming years tax return is good then you may qualify for a full doc loan.
  • Tidy up / paint / complete minor renovations on your property to increase its value.
Good luck!
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

DeeO
Posts: 6
Joined: Mon Mar 15, 2010 11:06 pm

Re: Paying 12% interest rate Help

Postby DeeO » Sat Nov 27, 2010 10:19 pm

Thanks for getting back to me so quickly..

I have few questions
I hope we dont have any trouble getting a full doc loan we have been in business for 4 years and have BAS/Accountant does our tax etc and we have no defaults...

I have one late payment on my mortgage it was 2 days late(honestly forget to transfer the money into account ) Do you think that this may affect our chances of refinancing?

When refinancing do I have to tell the bank about business loans or credit cards or is it just personal credit I need to show them ( as my loan has already been taken off as an expense which lowers my income I hope I don't have to add it back as expenditure)
i.e I have a $6000 business c/card and a $6000 normal visa do i have to tell them that limits on credit cards is $12000
How many months statements do most banks etc want is it 6 or 12 months
Thanks
Dee

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Paying 12% interest rate Help

Postby Otto Dargan » Sun Nov 28, 2010 6:19 pm

Hi Dee,

If the bank sees the late payment then they will want an explanation. Two of the major banks almost always decline a loan if they see a single late payment, even if it is just two days. They are very conservative in this regard.

Other banks will be fine with the late payment as long as you can show that you had the money elsewhere at the time. In other words it wasn't missed because you couldn't pay, but rather because you just forgot to transfer the funds into the right account.

Most banks require 6 months statements for your current loan, however when refinancing a loan from a specialist lender such as Pepper Home Loans, Liberty Financial, Bluestone Mortgages, TMA, Challenger, RESIMAC or a private lender then they will almost always ask for more documents than they have listed in their standard checklists.

It would not be unusual for them to ask you why you were with Pepper to begin with & also to ask for bank account statements and older home loan statements. I would not expect them to ask for more than a 12 month history for your home loan. If your situation is quite strong then a 6 month history may be sufficient.

Yes, you need to tell the bank about all loans that you are either a borrower for or a guarantor for. You would be a guarantor for your business debts. Lenders can add back interest on loans being refinanced. So if your Pepper loan was used for your business then they will look at your tax returns and add the interest you have deducted to your taxable income before carrying our their assessment. You can use our self employed income calculator to work out how the lenders would assess your income.

Note that some lenders will not approve a home loan to refinance a business loan. They would refer you to business banking who then charge a higher interest rate! Luckily not all lenders take this view, some don't care too much about the loan purpose as long as they have residential property as security.

Thanks
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


Return to “Home Loan Forum”

Who is online

Users browsing this forum: Bing [Bot] and 2 guests