My latest property purchase is is due for completion on 11th November. Since I will be travelling at the time, I will need to have all the completion and finance documents signed a week in advance (which should not be a problem).
The competition amongst mortgage lenders continues to work in my favour and I am expecting the bank to provide the finance at HIBOR plus 0.6% with a cash refund of 0.4%. The cash rebate is close to one monthly p+i mortgage payment. The penalty period for early repayment will be three years. I can get the penalty period reduced to two years by sacrificing the cash rebate. However, I would rather have the cash rebate - if I want to pay down debt early I have other loans which (i) are more expensive and (ii) are no longer in the penalty period I can pay down.
The interest rate curve has flattened and there is not much difference between one month and three month HIBOR rates. I will go with one month fixings on the theory that a normal yield curve is, well, normal.
The effective interest rate will be 4.85%.
On these terms, I should consider refinancing one of my older mortgages which is based on the prime rate. The numbers will be marginal, but it is worth keeping under review.
I am intending to do a full fit out on this property. Having seen the numbers (fit out cost and rental achieved) for a similar unit, the case for doing a full fit out is quite strong. The net yield of gross cost should be somewhere between 6-7%. This is before allowing for depreciation on the fit out which is something of an unknown quantity for me. Cash flow will be positive, in part due to the 20 year term.
Hopefully I will get the fit out completed by the end of the year and the property rented by mid-late January.
What's next?
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