Wednesday, April 4, 2012

That contract isn't what we discussed!

Things just keep going from bad to worse - this time it's finance.  The contracts for the loan arrived yesterday, and I got a bit of a shock when I read the details.
The first obvious one is the rate rise - which is somewhat expected, but not quite.  You see, we were making a final decision between NAB and HomeSide around the time the rates last went up - NAB hiked theirs by 0.10%, from memory.  At the time HomeSide was 6.54%.
So I was aware of that, and the broker and I discussed that.

But then when I received the documents today, the second thing that I noticed was the interest rate - 6.79%.  Somewhere between then and now, they've hiked their interest rate by 0.25% - it's now higher than NAB, though their comparison rate is lower.
That's not a big concern - what annoys me though is that the broker made no effort to mention this whatsoever while we were still in this process.

So that was the second thing I noticed.  What was the first?
We never agreed on an interest-only period for the loan, but that's what the documents I've received say.  It means five years of interest only payments, and then 25 years of principle and interest payments.

Now, when you do the math that's not so bad - with a 100% offset account I can just elect to put aside some principle as well and leave it in the account so it doesn't accrue interest.
But it's the mere fact we never spoke about the loan being structured that way and just going and applying for it in that format.

This isn't really a blocker, but how is all this stuff happening without actually disclosing it?!


  1. That sucks!! My mum is with Homeside which is NAB anyway it's just the name of the broker product, thankfully the legislation has changed now so won't affect you so much, but their break costs are/were HUGE! If thinking about staying with the 5 year interest only see if you can find out what the break costs are, I'm sure as you know 5 years is a long time in the world of finance.

  2. we almost went with a broker and he kept on insisting that we do the interest only option with our loan. my partner and i kept on telling him we don't wanna do it because we will just make the bank richer and us more in debt for longer. he also mentioned that it was the only way to go so it's good that we ditched him. we applied a loan ourselves and we were able to get a considerable amount of discount. from what i read, some brokers do get a commission whenever they keep the loan longer which made us realise why he kept on pushing our loan to be structured the way he wanted. just wanted to share our experience and all the best on your build.

  3. As above, if you just put into a 100% offset account the same amount as you'd pay if you were on P+I, you'll end up paying the same amount of interest over the life of the loan.

    In reality an interest only loan ends up meaning you're just required to pay back less, but still owe the same amount. At any point you want you then just take that excess money sitting in an account not accruing interest and pay down the loan.