Higher investment loan rates for my holiday home?

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awesome
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Joined: Thu Mar 12, 2015 5:56 pm

Higher investment loan rates for my holiday home?

Postby awesome » Fri Jun 12, 2015 11:04 am

Hi home loan forum,

My fiance and I own a holiday home in Brisbane. It’s a small place in a nice neighbourhood but we don’t live in it. We usually stay there from November through February after which we come back to our home here in Dalby.

We’ve had some friends sit the house sometimes and we’ve rented it out a couple of times. Now, we’re thinking of renovating it completely and renting it out throughout the rest of the year we’re not there. In order to help finance everything, we’re thinking of taking out an investment loan.

My fiance and I have never taken out an investment loan so we don’t know if we need to pay a higher interest rate for our holiday home. So do we?

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Otto Dargan
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Re: Higher investment loan rates for my holiday home?

Postby Otto Dargan » Fri Jun 12, 2015 2:48 pm

Hello awesome.

Welcome to the forums.

Lenders will consider the predominant purpose of your property before giving out a home loan. As your holiday home is expected to generate income for over 6 months in a year, it’s likely you’ll qualify for a residential investment loan to finance the renovations.

You won’t need to pay a higher interest rate for your holiday home and will likely qualify for standard competitive interest rates unless you’ve got bad credit or you’re in a bad financial situation.

If you have a bad credit history; you have defaults, judgments, missed repayments, too many enquiries or any debt agreements on your credit file then you may need to apply with a specialist lender at a higher interest rate.

By the way, will you be fixing your investment loan or going variable?

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

awesome
Posts: 11
Joined: Thu Mar 12, 2015 5:56 pm

Re: Higher investment loan rates for my holiday home?

Postby awesome » Sat Jun 13, 2015 12:40 pm

Hi Otto, thanks for your quick reply. We're really not that sure about fixing. Is there anything that we can refer to, which can help us decide whether or not we should fix our rate?

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Otto Dargan
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Re: Higher investment loan rates for my holiday home?

Postby Otto Dargan » Mon Jun 15, 2015 9:01 am

Hi awesome,

You can have a look at the should I fix my home loan page to get an idea of whether or not you should fix your investment loan.

Generally, a fixed rate investment loan may not be a suitable choice if you’re planning on:
  • Selling or transferring the title of your property.
  • Making large extra mortgage repayments.
  • Renovating or building a new home, where often you may need to refinance.
  • Switching or refinancing your investment loan.
This is mainly because fixed rates tend to have high exit fees known as break fees that you need to pay if you break the fixed rate contract. You may also not be able to make large additional repayments; usually no more than $10,000 per annum before penalties apply.

However, you may consider a flexible fixed rate investment loan if you’re planning on making extra repayments. This is essentially splitting the loan to be half fixed and half variable, but this won’t be suitable if you’ll be selling or refinancing because you’d still have to pay large exit fees.

If you’re still not clear whether or not you should fix, you can have a look at our website. You can also discuss things directly with one of our specialists by calling us on 1300 889 743 or by fill in our free assessment form.

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

awesome
Posts: 11
Joined: Thu Mar 12, 2015 5:56 pm

Re: Higher investment loan rates for my holiday home?

Postby awesome » Mon Jun 15, 2015 12:05 pm

Hmm… well, I am intending on making extra repayments so a flexible fixed rate loan seems like the way to go. I’ll give you a call by the end of the week to discuss things in detail. Thanks for your quick and to-the-point reply, Otto. With you guys’ help, I’m sure my fiance and I can get the loan we want :)

homer
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Re: Higher investment loan rates for my holiday home?

Postby homer » Sat Aug 01, 2015 1:02 pm

Hello everyone,

I’m also considering getting a flexible fixed rate loan. I’d read that this is a relatively new thing, new in Australia at least. What I want to know is about the big banks that let us borrowers make extra repayments without any restrictions. Is there anyone who can list out the banks and their policies regarding this?

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Otto Dargan
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Re: Higher investment loan rates for my holiday home?

Postby Otto Dargan » Mon Aug 03, 2015 8:23 am

Hi homer,

Only a handful of lenders may allow you to make large extra repayments and have access to other features like redraw and line of credit, without any restrictions on a flexible fixed rate loan as long as you don’t pay off the loan completely.

Here is a list of some of the big lenders who allow this, including their policies regarding extra repayments:
  • ANZ - You may pay up to $5,000 per annum or 5% of the original loan amount, whichever is lesser.
  • CBA - You may make up to $10,000 extra mortgage repayments per annum.
  • NAB - You may make extra mortgage repayments of up to $20,000 during the fixed rate term.
  • Rams - You may pay up to $30,000 during the fixed rate period.
  • St George - Like Rams, St George also allows you to pay up to $30,000 during the fixed rate term.
If you want to find the cheapest fixed rate and someone else to handle all the paperwork for you, give us a call or browse through our website.

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

homer
Posts: 4
Joined: Mon Mar 16, 2015 6:23 pm

Re: Higher investment loan rates for my holiday home?

Postby homer » Tue Aug 04, 2015 10:15 am

Thanks a lot, Otto. That was really helpful - it was exactly what I wanted to know. You see, I’ve gone through different blogs and websites but none of them include all of what you’ve just pointed out. Thanks again and I’ll definitely go through your website for more info. Bye :)


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