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Case Study: Owner occupied and investment on owner occupied rates

H and Y is aprofessional young couple, H is a IT techonian  and Y is a medical doctor.They have a home unit inneutral Bay Sydney and Harley has a investment property in Surry Hills, Yishahas an investment property in central coast. They saw our Wechat post inregards to current low rate and they have made enquiry to refinance for abetter rate. 

They are currently with Westpac and CBA, we have recommended to consilidate all debts to a same lender, there are a few benefits for doing so:

Generally bank will charge anannual fee for each borrower(s); this fee covers application, variation, offset account, loan account redraw and credit card; if you have multiple loans under the same borrower you only pay once, so if you have 3 properties and have them financed through three different lenders, you will end up paying three annual fees.

On most standard variablerate product with major lenders, there is a rate discount applies to the loan,depending on the quality and risk of the loan. If the loan amount is bigger, LVR is lower, you generally receive a bigger discount margin, so your rate will be lower. By combining all loans together you can increase the chance of getting a bigger discount margin, and this margin will not change during thelife time of your loan.

Having all your finance atone bank will be easier to manage. You can have savings in your offset account to save interest, pay bills, repayments for all loans can come out from the offset account, rental income can flow through the offset account to paynon-tax deductable loan off faster. Credit card repayment can also be setupwith auto pay features, different loans can be renamed to be easily recognized. 

The most important featurefor this refinance is we are able to obtain Owner Occupied interest rates toapply to investment loans. According to the Special of the bank, if the clienthas owner occupied loan and investment combination, the owner occupied portionof the total loan value is at least 25%, and total application value is greaterthan $750k, all loans under this home loan package will be on owner occupiedrate of 2.80%. Total savings for this client is over $13,000 per year. 

We did have a problem inexecuting the refinance: properties were all in different names, they were onein male applicant’s name, one in female applicant’s name and one in jointnames. Bank policy required all security in the same name.We have spoken to the bankand was able to use each of the borrower to be a guarantor of each other,although we have to pay a small fee for the guarantee but we can resolve thisproblem and loan was settled within 6 weeks.

We have gathered supportingdocuments from these clients, including passport, driver licence, marriagecertificate, pay slips, bank statements, loan statements, rental statements,council rate notices and credit card statements, loan was conditionallyapproved in 3 days, valuations for 3 properties were carried out in a week,then mortgage documents signing and discharge from their current bank.

All loans were refinancedfrom two different lenders to one, client was able to release $100,000 equityfrom their investment property, so they can seek for some other investment withbetter investment return; rate were lowered from 3.26 for owner occupied, 4.09for investment, total interst savings are over $13,000 per year.

For each refinanced property,there is a discharge fee from their existing lender, a discharge of mortgageregisteration fee, new registeration fee for the new mortgage, settlement andnew annual fee for the new bank, apporximately $750 per property, so total feeswould be around $2250.Traditional bank fees likevaluation, legal and application have all been waived.

By reviewing clients currenthome loan position with Anson, client was able to compare, prepare, achieveresults. All properties are revalued at no costs, interest rate are lowered,bringing savings to over $13,000 a year. Lender fees are also lowered to one annual fee only. They have a better cash flow position with $100,000 in the offset and is prepared to get into their next investment property.

By Mark Luo, May 2020
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