Residential Borrowing
In residential borrowing markets, NAB has joined ANZ and CBA in adding massively to their longer-term fixed rate mortgage prices, citing an expected increase in the bond market cost of funds next year, but borrowers can still enjoy the low cost of funds available from the pool of lenders who’ve not followed the Big 4’s visionary lead.
The most compelling offers in the residential borrowing market are:
- Principal and Interest fixed rates for owner-occupied home loans are still below 2.00% in some cases.
- Principal and Interest fixed rates for investment loans are as low as 2.10%.
- Owner-occupied variable rates are asmlow as 1.99%.
- Investment variable rates are as low as 2.09%
Commercial Lending
Self-employed customers have sought refuge in the commercial lending world, where guidelines have been relatively unaffected.
Notable offers in the commercial space are:
- Companies can borrow money without offering up any property as security. This is often achieved by a GSA (General Security Agreement), which allows the lender to take security over the assets within the business.
- Interest rates on this type of arrangement can be as low as 2.5% p.a (P&I) or 2.8% (IO)
- Commercial rates have converged on residential offerings in recent years, which has allowed businesses to make much needed expansion post-Covid without having to rely on government subsidies.
- Those who have a property to be used as collateral can tie it in with the application which will mean the bank can reduce the rates further to match or even become lower than the bank’s residential rate offering.
To best showcase the great results available through commercial lending channels, the following two scenarios showcase what’s possible.
Scenario 1: To assist with the refinance of an existing bank and related party loans, a commercial term loan with a $2,190,000 facility amount was taken out, based on a valuation of $3,650,000. The 5year loan comprised interest only repayments with a 60% loan-to-value ratio, an indicative rate of 2.39%, maximum 60% LVR, lender establishment fees of 0.30% and transaction costs of $5,000 for valuation, legal, doc prep and disbursements.
With this lending facility in place, the client was able to release a further $250,000 in equity from his current loan facility, while saving over $10,000 in annual interest repayments.
Scenario 2: In order to refinance a NAB loan of $260,000, and a NAB fit-out loan
of $510,000, plus fit-out of new premises
for $500,000, a client took a 5-10year commercial term loan with a facility amount of $1,270,000. The loan comprised principal & interest repayments at a 3.00% indicative rate, max loan-to-value ratio of 100%, lender establishment fees of 0.40% and $500 of transaction costs for valuation, legal, doc prep and disbursements.
This client was able to borrow $1,200,000 without using their residential security, as the loan was simply secured against the assets within the company.
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If you would like to know more, get in touch with James Leader at Shore Financial.
Email jamesleader@shorefinancial.com.au or call 0450 029 418