A Successful & Complex Refinance

Background

First Point Group takes pride in being able to offer our clients solutions for all their finance needs, no matter how simple or complex. We love a good challenge and this article shows how we overcame exactly that for one of our many valued customers!

Recently, First Point Group was faced with a complex refinance application for a client with multiple loans; both investment and owner occupied, as well as an application for additional finance at the same time. The client’s ultimate plan was to borrow to demolish their property and build their dream family home.

The Challenges

Borrowing Power – Our first hurdle was our clients’ existing lender would not lend sufficient funds to finance the construction. As we do for all of our clients, we then widened our focus to include a range of competitive Lenders who could potentially provide more flexibility.

Best Interest Rate – In order to achieve the best possible interest rate, it was beneficial to have all of the clients’ loans with the same lender, including the existing loans as well as the construction loan. In a way this is like “buying anything in bulk” – you would expect a better discount.

Refinancing Costs – Importantly, we found that several of the existing loans were locked into fixed interest rate contracts, so there were going to be significant “break costs” if we chose to refinance these loans. In order to go through the cost of refinancing to another lender, it had to be worth it. The interest savings would need to repay these costs within a relatively short period (ie. 12-18 months).

To meet the needs of the client, and overcome all of the above mentioned issue, we had to:

  • Research for a suitable lender based on product features, Lender policy and serviceability limitations
  • Calculate the refinance savings achievable by switching to each potential lender
  • Calculate how long it would take for our client to recover the “break costs” if they were to break their fixed interest rate contracts. Depending on the size of the loan, and length of time remaining for a loan with a fixed rate of interest, the costs of breaking the contract can be tens of thousands of dollars!

The Solution

We were successful in working with the client and negotiating with the right Lenders to enable a complete refinance of all loans, which provided the capacity to fund the construction, and also recover the break costs within a 12-18-month period. The client was moved to loans with far superior interest rates, and the construction of their home is currently underway!

This is one of the many loans First Point Group have had approved where persistence is the key to achieving that final approval. Our highly experienced team will always anticipate (where possible) and overcome any challenges to meet the needs of our clients.

If you would like to talk to the team regarding your next purchase, review or refinance whether you are seeking residential, commercial or asset finance, please contact us to find out how we can help you.

Interest Rate Update – August 2016

Cash Rate – Reduced to 1.5%

The Reserve Bank of Australia (RBA) has just announced it will reduce the official cash rate to 1.5%.

In a finely balanced decision the RBA would have been particularly influenced by the results of the June quarter inflation rising only 0.4% and hence only 1.0% over the twelve months to the June quarter 2016. This compares with a rise of 1.3% over the twelve months to the March quarter 2016.

With inflation running well below the RBA target band of 2.0%-3.0% and the labour market having lost momentum over recent months the RBA felt it was time to move rates down again.

The RBA will update its forecast outlook in the Statement of Monetary Policy on Friday 5th August which will provide some reasoning behind their “cut” decision and paint a picture of the near future.

As we see interest rates continue to fall, the next 12 months will be very interesting times. Despite three cash rate cuts of 25 basis points each since March 2015 there has been little benefit to the economy and other macro tools are likely required to refire the economy. Two things are for sure:

Interest rates are historically low so borrowing is very cost effective

There is not much left for the RBA to play with…

For more information, or if you would like a free review of your residential, commercial or SMSF loans against other competitive products in the market please contact Peter, David or Simon via this email, our phone: (03) 9882 2500, or visit http://www.firstpointgroup.com.au/