DunRoaminTheUK

We received a letter last night from Suncorp indicating that they had raised our interest rate by 0.2% (almost 25 basis points) which is outside (obviously) of any rate rise set by the RBA. This sent me through the roof as our mortgage is already a 'killer'. Subsequently, I followed up my anger with a call to Suncorp letting them know that I thought that their actions were irresponsible, crass and disgusting. I received the standard crib-sheet responses. She even tried to use the opportunity to sell me a fixed-rate (higher rate) mortgage. I had to explain to her that this was actually a larger impediment and not a solution.

Anyway, my current tentative thoughts for an escape strategy is to (a) sell the house (if we can) and take the net proceeds (post-fees) of about $270,000 (if we get my downwardly revised sale price) and (b) place them into a high interest rate account to (c) use the interest to pay for about 70% of our weekly rental cost after moving into a rental (again - *sigh*).

If this plan worked we need to use about 5% of our net monthly income to pay for our rental, releasing the vast majority of the remainder as disposable income.

One concern is that we would have to declare the net proceeds as income and so be liable to pay tax on it? Is this the case?

Any thoughts, suggestions or criticisms?

asprilla

If you want an honest opinion, your plan will be sending you backwards not forwards. Selling your place will cost you at least $10k. Moving to other accommodation costs money. You will be switching from paying off an asset (your home) to paying off someone else's asset....not ideal in the long term.

You can do the following things:
a) you and your family need to earn a bit more $$$. This might mean you and your wife (if you're married) look for better paid jobs.
b) you need to spend less money. Write down a list of everything you spend money on. What stuff do you really need? Chances are, if you look hard you will find better, cheaper deals to provide the same things. As for all the other bits and pieces that you don't need - cut them out completely. It might not be much fun, but it won't be forever.
c) think about getting a loan with another provider that offers a better rate.

cheers

asprilla

You will earn interest of approx $20k which is taxable income. at the end of the financial year you'll probably be looking at having to pay $6k worth to the tax office.

DunRoaminTheUK

Yeah, you're probably right.

I think that before we move to this type of radical plan we should refactor our budget.

Actually, we pay $265 per month for Medibank private medical (top cover with extras) and we have barely used it in the year that we've had it. This needs to be cut down to a lesser hospital cover and extras done away with...for starters.

I really trusted and liked Suncorp until they did this (as they resisted unofficial rate-hikes in the past when people like ANZ were doing it) but now I realise they truly are all the same.

spartacus

On the theme of radical rethinks, have you thought about getting a lodger? My BIL's neighbour has recently started taking in students from a foreign language school. All short-term temporary, $200 a week for bed and breakfast.

goldchoccycoin

Any opportunities in your area to downsize to a smaller cheaper place? That way you'd still have a 'home' with smaller mortgage and potentially pay it off quicker. It would also be easier to upgrade again if your circumstances change.

Best of luck with your decision.

bcworld

I'm not sure what you mean by unofficial. Home loan rates have never been tied to the RBA rate - otherwise surely every bank's interest rate would be the same. If Suncorp have only done one 'unoffical' interest rate rise and they're suddenly the most expensive out there then it sounds like they've been overcharging you for ages.

You should consider paying the exit fees and going to another (non-bank) lender before you sell the house.

DunRoaminTheUK

I was just using the nomenclature that seems to be used a lot by the media.

Our rate is 8.95% and from what I can see this is probably tending more towards the lower rates but this doesn't help me.

Anyone using a 'better' lender?

asprilla

There you go. You can go on iselect and get yourself a good family cover for approx $160 per month, that'll take you about 15mins to sort out. Interest rate rise covered !

If you keep looking, I'm sure you'll find other ways to save a few $$$'s.

DunRoaminTheUK

It's a 'possible' but it will be a pain in the arse to start the waiting-periods all over again?

Yeah, we will endeavour. Thanks for the input

(BTW, the spell-checker is driving me 'effin mad! Is there a profile option to change it to British English?)

bcworld

8.95% is discounted by 0.7% though isn't it? Pretty much all the bank lenders offer 0.7% discount under various names, 'professional package' etc....generally for home loans over a certain amount and salaries above a certain level, most people are eligible.

These figures exclude the 0.7% discount.

http://yahoo.infochoice.com.au/banki...der=descending

Suncorp is 2nd most expensive and the most expensive major bank.

asprilla

we're with homepath, they were very good 2yrs ago when we joined but now they've crept up to 8.82%.

Homestar finance look good at 8.55% with no establishment or ongoing fees.

comet555

Do you still need/want private cover? They've just changed the income levels to $150,000 for a family (instead of the old $100,000).

I realize there are other reasons for having and keeping it besides money, but it's something to consider.

DunRoaminTheUK

I pondered this question myself and whilst I'm quite prepared to kick the extras into touch I think that experience has taught us that private hospital cover is worthwhile keeping. Our little boy needed grommets urgently last year, to help with his speech development (before we went private), and it ended up costing us about $1,000. I'm a great believer in /Murphy's Law'.

goldchoccycoin

I don't think you have to start waiting periods again either - they 'carry over' with most packages.

Call a few providers to confirm.