Author Topic: Australia - getting a tiny bank loan  (Read 2803 times)

mqq

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Australia - getting a tiny bank loan
« on: February 10, 2015, 06:22:27 PM »
Hi Aus Mustachians,
wondering if anyone who has had experience in borrowing from banks can help....
we are saving up for our first home and will have most of the money ready by the time we are able to buy. We will only need a loan for about $100,000.
I've had a look at the bank websites and basically, the assumption in all the calculators is that you'll borrow a large amount of money and pay it over a long period of time. We are hoping to have the amount we borrow paid off within about 3 years, and as I said it's a pretty small amount.
Does anyone know how to go about getting such a small loan? is it even possible? I've never borrowed money before so I have no idea what to do. I know if I ask the bank they will give me advice that suits their purpose (getting me to pay the maximum interest) rather than our own interests (getting a small loan and paying as little interest as possible).
thanks :)

givemesunshine

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Re: Australia - getting a tiny bank loan
« Reply #1 on: February 10, 2015, 06:38:16 PM »
I suggest speaking with a mortgage broker - they can find the best deals to suit your circumstances. Speak to more than one.

Also, consider taking a bigger loan (to get a better interest rate - interest rates are often higher for smaller loans) and then putting all the extra in an offset account (thus reducing the capital immediately). This also has optimal tax benefits if the house becomes an investment property in the future.

I'm by no means an expert but I have been doing a lot of reading as I will also purchase my first home within ~12 months.

Best of luck with it all.


vagon

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Re: Australia - getting a tiny bank loan
« Reply #2 on: February 10, 2015, 06:47:31 PM »
You should be able to easily get a loan for that amount.

Also, consider taking a bigger loan (to get a better interest rate - interest rates are often higher for smaller loans) and then putting all the extra in an offset account (thus reducing the capital immediately). This also has optimal tax benefits if the house becomes an investment property in the future.
+1

Figure out the value of the property and get the loan for 80% of the purchase price. This will maximise the discount lenders will give you.
Depending on your cash flow and your intent to turn the property into an investment, you can then move the funds you have sitting around into a 100% offset account or pay it off and retain the preferable interest rate.
Note the comment about cash flow as, although it will offset the interest charged your lender may still keep your repayments to the value of the full loan (meaning you pay more principle as a percentage of your repayment).
Note the comment about the intent to make this property as an investment property as paying off the principle has tax disadvantages and you should structure your loan and offset accordingly.


deborah

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Re: Australia - getting a tiny bank loan
« Reply #3 on: February 10, 2015, 06:58:00 PM »
Try a credit union or a building society - mine definitely does $100k housing loans, and $250k +$1 gives you the best deal.

marty998

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Re: Australia - getting a tiny bank loan
« Reply #4 on: February 10, 2015, 11:52:34 PM »
You should be able to easily get a loan for that amount.

Also, consider taking a bigger loan (to get a better interest rate - interest rates are often higher for smaller loans) and then putting all the extra in an offset account (thus reducing the capital immediately). This also has optimal tax benefits if the house becomes an investment property in the future.
+1

Figure out the value of the property and get the loan for 80% of the purchase price. This will maximise the discount lenders will give you.
Depending on your cash flow and your intent to turn the property into an investment, you can then move the funds you have sitting around into a 100% offset account or pay it off and retain the preferable interest rate.
Note the comment about cash flow as, although it will offset the interest charged your lender may still keep your repayments to the value of the full loan (meaning you pay more principle as a percentage of your repayment).
Note the comment about the intent to make this property as an investment property as paying off the principle has tax disadvantages and you should structure your loan and offset accordingly.

This is pretty much all you need to know. Set your loan up as interest only for the max possible period, and just mindless dump every dollar into the offset account.

Having a mortgage that is fully offset is a wonderful thing. It's also good as a "security" reason - nobody can fraudulently sell your home without your knowledge, because they would have to discharge the mortgage outstanding.

Small but growing problem...too easy to sell a house in Aus without proper docs.

Astatine

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Re: Australia - getting a tiny bank loan
« Reply #5 on: February 11, 2015, 02:55:52 AM »
I second the recommendation to talk to a mortgage broker, but probably best to do so after you have some idea of what you want. eg mortgage offset or redraw etc.

Having a mortgage that is fully offset is a wonderful thing. It's also good as a "security" reason - nobody can fraudulently sell your home without your knowledge, because they would have to discharge the mortgage outstanding.

Small but growing problem...too easy to sell a house in Aus without proper docs.

o.O really? Title documents don't count for anything?