First sub 2 per cent investor mortgage offered by Loans.com.au

First sub 2 per cent investor mortgage offered by Loans.com.au

An online lender has become the first in the industry to offer investors a mortgage rate below the coveted 2 per cent mark -- but there are a couple of conditions that need to be met.

Loans.com.au has taken the wrapping off its latest financial product: an investor home loan with an interest rate of 1.99 per cent for the first year of both principal plus interest and interest-only home loans. (The product has a comparison rate of 2.71 per cent.)

“This is the lowest investment loan rate offer in Australia right now,” Marie Mortimer said, managing director of Loans.com.au.

“Investors who are considering switching to a lower rate … should take the opportunity to reassess their loan provider and potentially refinance.”

The rate is the lowest in RateCity’s comprehensive database of investor mortgage products, while the 2.74 per cent rate it reverts to from its second year is the seventh lowest.

Part of a bundle

Investors interested in refinancing with Loans.com.au need to bring their owner-occupier mortgage along too as a refinancing bundle onto its Smart Booster loan.

A RateCity analysis found if someone with an owner-occupier loan and an investor loan of $400,000 each switched from the RBA’s existing customer rates to the 1-year introductory rate from Loans.com.au, they could potentially save $9,725 in the first year, including refinancing costs. Over the first five years, they could save more than $34,935.

Loans.com.au was the first lender to offer owner-occupier mortgages below two per cent, Ms Mortimer said. The nine year old company is a subsidiary of Firstmac, a 40 year old non-bank lender with a $12 billion mortgage portfolio.

Interest rates at low levels

The 1.99 per cent introductory interest rate is 0.50 per cent lower than the next investor variable rate of 2.49 per cent on principal plus interest loans, and 0.70 per cent lower than the next 2.69 per cent interest only investor loan, Sally Tindall said, research director at RateCity.

“While many customers are unlikely to meet the terms and conditions on this package, people with both an owner-occupier and investment loan could stand to make significant savings in the first year if they move both of their mortgages across to a 1.99 per cent rate.”
 
“Both these rates will jump up after the first year but the revert rates are still competitive, falling in the top 3 per cent of comparable loans.”

Banks are having to be more competitive to secure a shrinking pool of new home loans, Ms Tindall said, adding it is leading to a tumble in interest rates on mortgages.
 
“This kind of competition is great for investors, particularly if they’re willing to refinance,” she said.
 
“Refinancing requires a bit of paperwork, especially for investors, but the savings are likely to far outweigh the effort you’ll need to invest to make it happen.”

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No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

How to use the ME Bank reverse mortgage calculator?

You can access the equity in your home to help you fund your needs during your senior years. A ME Bank reverse mortgage allows you to tap into the equity you’ve built up in your home while you continue living in your house. You can also use the funds to pay for your move to a retirement home and repay the loan when you sell the property.

Generally, if you’re 60 years old, you can borrow up to 15 per cent of the property value. If you are older than 75 years, the amount you can access increases to up to 30 per cent. You can use a reverse mortgage calculator to know how much you can borrow.

To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.

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While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

Cash or mortgage – which is more suitable to buy an investment property?

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When does Commonwealth Bank charge an early exit fee?

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The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

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What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

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There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

How much deposit will I need to buy a house?

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What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

Remaining loan term

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How much deposit do I need for a home loan from ANZ?

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