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.


Anonymous said...

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.

Anonymous said...

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?

traineeinvestor said...

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.