November 20, 2013
Banks don’t normally give big discounts for high LVR loans and commonly the best interest rate deals are preserved for borrowing less than or at 80%. So not only will those deals have to incur Lenders Mortgage Insurance the interest rate is also higher. So according to Otto Dargan (Smart Property Investor) here’s what to do?
Reject the professional package deal. These deals offer interest rate discounts but you have to pay an annual fee. It’s not competitive in today’s market where banks can and do give bigger discounts
Some lenders don’t like to compete in the 80% plus territory. Why? Because they fund the loan by borrowing money overseas and can't get the most competitive interest rate if too many of their loans have high LVR’s (i.e. are 90-95% of the value).Not every lender is in this situation. Some banks don’t have many loans at 95% and so are happy to offer large discounts to new customers.
However some banks have the exact same pricing for 80% loans as they do for 95% loans which can make an incredible difference to your bottom line.
What happens if the only bank that will accept your application doesn’t give good discounts at 95% LVR? Well you can consider fixing your interest rate! In many cases they don’t charge you a higher rate if your loan is fixed, only if your loan is variable. Of course the downside is that when your fixed rate expires then the party is over and you will go back to the higher variable rate.
Choosing the right bank up front makes all the difference. Talk to your Julie Browne your local Mortgage Choice Expert.
Source: Dargan O, 2013, ‘Smart Property Investor, Online’