Rachael Dalton and Gavin Staindl just had their first child. And thankfully, they’ll have about $800 a week extra to spend on caring for the new addition to their family. That’s because the first home buyers have come out the other side of a financially brutal year.
Due to the nature of their income, major banks wouldn’t give the Victorian couple a mortgage. So they had to turn to a so-called ‘third-tier’, non-bank lender.
But that came with a nearly 9 per cent interest rate.
“It allowed us to get into the dream property when no other bank would look at us,” Gavin told Yahoo Finance.
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Paying nearly 9 per cent is well above the most competitive mortgage rates on the market, which are typically about 2 per cent above the official cash rate, which now sits at 4.35 per cent after Tuesday’s RBA decision.
After about a year, the couple were able to refinance and switch lender’s to CBA-owned BankWest on a much more reasonable rate of below 6 per cent, which they say has reduced repayments by $800 a week.
“The plan was always to wait 12 months and then refinance to a more manageable percentage,” Gavin said.
The pair, and their new son, are now happily in their Beaconsfield property after “noodles and tin can soup for a while,” he joked.
“We had to take a hit for 12 months and now it’s smooth sailing.”
Mortgage tactic ‘becoming more common’ for buyers to get a foot in the door
Fiona McLean from Loan Market was the couple’s broker and told Yahoo Finance it’s a growing tactic some first home buyers are forced into.
“Everyone’s strategy will be different. It is becoming more common for people to seek out a loan from a third-tier lender to get their foot in the door, before moving to a more competitive interest rate as soon as they can,” she said.
Aussies who are self-employed or have more complex incomes may find that they fall outside the lending criteria for major banks.
“Whereas smaller lenders may be more flexible,” she said.
“While this strategy can mean a higher interest rate, many people are choosing to accept it as a strategy to get into the market sooner rather than watching prices increase.”
She said understanding when clients will satisfy the criteria from a traditional bank means the strategy can be adopted with a clear and potential end date in sight.
