Monday, May 14, 2007

New Property Purchase (2) - Financing

I started the search for the lowest cost mortgage for my new investment property today.

So far the best offer on the mortgage financing is prime - 3.2% (effectively a floating rate of 4.8%) with 0.9% cash back and the usual 3%, 2%, 1% early repayment penalty in the first three years.

I was rather disappointed to find that the banks I approached have all stopped offering HIBOR linked mortgages. Although the rate quotes above is actually slightly lower than the current HIBOR linked rates I am paying (about 0.1 - 0.3% less), the responsiveness of the HIBOR fixing mechanism has always been preferred especially when interest rates fall.

I will keep looking and see what is available, but the best offer so far already looks like the one I will use. The fact that it happens to be one of the banks we already use is an added bonus as I will go through less of the tiresome money laundering checking that banks have to do when taking on a new client.

I have also instructed lawyers. Given the relationship and the fact that the lawyers we use are already very cost competitive, I do not see any point in spending time shopping around for cheaper legal fees.
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3 comments:

  1. Anonymous10:27 AM

    Hi Trainee,

    Congratulations on your new property purchase! Care to give any hints on which area you bought in?

    For mortagaes, you might want to check out Standard Chartered. They're offering HIBOR + 0.5%, and capped at Prime - 3% I think.

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  2. Anonymous5:19 PM

    BTW just noticed on the HSBC site that margin loans have dropped from interest rate of 10% p.a. to 4.88%, that's on par with mortgage rates!

    What on earth is going on?

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  3. traineeinvestor11:10 PM

    Hi Raphael

    Thanks for the information on Standard Chartered. Their financing offer is attractive but I have concerns about their willingness to approve a lease quickly and without imposing unreasonable changes to the lease.

    I will probably stick with one of my existing lenders.

    The property is an older building in Mid-Levels.

    If the cost of margin financing has got down to 4.88% (assuming no fees etc) that is a great deal - very close to the current mortgage rates. Very surprising.

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