Nerfonomics

[Squidfayce]

Slightly off topic....

Regarding putting prices up by unsubstantiated amounts, one of my clients had a clause in their service agreement that gave them the right to audit my books to ensure that the rate I was charging them was reasonable. That one lasted about 2 seconds once my lawyer saw it. I doubt they would allow me to examine their books and capability to pay whatever I want to charge them! It took me over 6 months of legal wrangling to get that (and other ridiculous clauses) sorted out, and every time they would try something else on, my hourly rate increased.

Ironically, they are one of my best clients now.

I have put my rates up 10% this year. My expenses increased by more than that. PI insurance was particularly memorable with a 30% hike. Cunts!

that's not an unusual clause btw. I don't know what you do, but many large scale businesses survival relies on guaranteed output from a third party. Having that clause allows some relationship viability to be validated as a going concern. Being able to prove that viability can also be pivotal to evidence to lenders that you're good for any mega bucks loans too. There's a saying in my line of work (and others) - "trust, but verify"

 

[MasterOfReality]

Yeah I understand that if you are a major mining contractor, equipment supplier etc. I'm just a engineer running my own small consultancy hehe. These guys (one of the worlds biggest miners) were after my financials to make sure they were not being overcharged, or being charged different rates to other clients of mine. They would most likely do the same with other consultants and then sit down and put together a spreadsheet comparing everyone.

I had the clauses amended, restricting their access to data that is relevant to my business with them, and enough to allow them to determine if I was complying with business conduct law. The rest they had no right to access.

Had noticed though that they would apply the same processes to every company, without consideration of company size. Then wonder why I didn't have an OH&S policy, an I&D policy, a non-discrimination policy, a full blown site health and safety management system etc etc.

 

[Flow-Rider]

There are government registers with the ATO when you owe too much money, only an idiot would give that type of personal information away.

 

[indica]

And Metricon looks to be in the shit now.

One of my loans will be going up to 4.38% - time to refinance

 

[Squidfayce]

And Metricon looks to be in the shit now.

One of my loans will be going up to 4.38% - time to refinance

metricon has been in the shit for months already.

Why didnt you lock in when we were at effective 0% (0.1%) cashrate? There was literally zero chance mortgage rates were going to go lower.

 

[indica]

Why didnt you lock in when we were at effective 0% (0.1%) cashrate?

Variable has unlimeted extra repayments, fixed generally does not. That's what works for me.

 

[Squidfayce]

Variable has unlimeted extra repayments, fixed generally does not. That's what works for me.

Extra unlimited repayments is a ploy by banks to keep you in their profitable products when rates are low.
A fairly significant margin of what could be going towards your extra repayments has been eaten up in the ~2.x% premium you're paying on a variable to make those extra repayments.

e.g. 500k loan at 1.9% is $1824, at 4.4% its $2504 at 6% $2998.
At the lower end of where new rates are now you'd be saving ~$680 per month and over a grand per month at the higher end not too far away . So over a three year fixed period at 1.9% on that average 500k figure you'd be able to save in interest alone ~+20k (or more if you include the extra "extra" repayments you are putting towards it currently) that you could dump all of that on your principal balance when you come off fixed that isn't coming off now. Currently you've opted to give all this money away for free to the bank instead.

Unfortunately with banks now having made their fixed rates significantly higher than their variable, this strategy's boat has sailed.

 

[Calvin27]

Variable has unlimeted extra repayments, fixed generally does not. That's what works for me.

The catch with fixed is that when you complete the fixed term you automatically go onto one of the worst bank loans known in existence. Not a problem for anyone saavy enough to note the end date and set up a refinance shortly after, but some don't and cop a few months at a ridiculous rate.Imagine coming out of a sub 2% fixed rate into something that starts with a 4 and is about 100bp more than equivlanet competitors. I calculated that the bank only needs you to be on that inflated rate for 6 months to make back any 'savings'.

That's if you can refinance. In my case going from 2 DINK to 1 income plus dependent is a double whammy that might not get me refinanced, or at least in favorable terms.

So at the time, for me at least, it was 1.7 fixed for 2 years, vs 1.89% variable and not have to worry about refinancing. This was after 3 cycles of 'cashback shopping loan' (pretty sure big 4 banks have blacklisted me for loans at this point haha).

 

[Squidfayce]

The catch with fixed is that when you complete the fixed term you automatically go onto one of the worst bank loans known in existence. Not a problem for anyone saavy enough to note the end date and set up a refinance shortly after, but some don't and cop a few month at a ridiculous rate.

That's if you can refinance. In my case going from 2 DINK to 1 income plus dependent is a double whammy that might not get me refinanced, or at least in favorable terms.

So at the time, for me at least, it was 1.7 fixed for 3 years, vs 1.89% variable and not have to worry about refinancing. This was after 3 cycles of 'cashback shopping loan' (pretty sure big 4 banks have blacklisted me for loans at this point haha)

Its not really a catch, its just how it works. It has to end sometime, and then you need to pay the rate that keeps you on the loan term trajectory. Its just shifting the obligation. The catch with fixed has always been that you never knew if you're gonna lock yourself into a higher rate and then miss out on rate cuts. But that wasn't really a catch/risk when the cash rate was 0.1%. SO it was fairly unique situation where it wasn't a gamble.

But yeah, that end date is clearly marked in all my calendars with reminders set for several weeks in advance to start shopping around. The average lifecycle of a residential mortgage at most banks is 3-5 years. If you're on the same product for 30 years, you're losing money. Same goes for insurance products (health, car, home etc.)

 

[Calvin27]

The average lifecycle of a residential mortgage at most banks is 3-5 years.

You should have a look at homw many flipped loans ozbargainers have done. I thought i did well with 3 loans in 2.5 years netting me about $12k in cash. Others took it to the next level and raked in tens of thousands with IPs thrown into the mix.

I looked at my finances and probably would have come up short refinancing a fixed loan next year with wife still on mat leave, it would have meant she has to go back to work earlier than she likes and kids in more childcare days as we both need to be full time. Obviously after the loan in process you can adjust back but still, bankers treat mat leave like it's pretty much unemployment, probably because a lot fmothers don't go back to work?

 

[Squidfayce]

12k is nothing to sneeze at. There can be drawbacks to chopping and changing quickly though and can put you at a disadvantage. Some legacy rules in decision systems would see this as a sign of stress. Most lenders have automated decisioning systems. Even though you can explain to a human that you were financially savvy and better off for doing so, you could come up against credit engine rejections that staff cant override that have nothing to do with whether you can afford the loan or not. I figure any lender that has lost money from these promotions will also code some decisioning in to their engine to look for this behavior (not hard with open credit reporting and open banking) and either shade such applications or outright reject them. Time will tell.

 

[Flow-Rider]

It depends on how much Indica is paying extra, it comes to a crossroad where it exceeds the cheaper rate of a fixed loan because it reduces the time period of the loan and cuts back on the principal amount that the interest applies to.

 

[Squidfayce]

It depends on how much Indica is paying extra, it comes to a crossroad where it exceeds the cheaper rate of a fixed loan because it reduces the time period of the loan and cuts back on the principal amount that the interest applies to.

Not really. Definitely giving money away for free.

At its most basic, (i know you know this) if you're paying interest on a loan, the faster you pay off the loan, the less interest you pay over time. So in a traditional sense by making extra extra repayments, you indeed are are paying it off faster. BUT there's ALWAYS ways to pay even less.

There isn't a really a vector on a long term mortgage where this crosses over and renders the strategy useless unless Indica was going to pay out their mortgage in less years than the mortgage was fixed for. To put that into perspective, that extra repayment would be to the tune of +~14k per month on a 500k loan). At which point the strategy has no weight. However in all other scenarios, you save in interest regardless of what extra you want to pay.

Look at it this way If you wanted to pay off a 30 year mortgage in 15 years, You could still have taken a fixed interest period and pay the loan off within 15 years. You're just deferring when you reduce your balance to three years in (or however long you took the fixed period for).

As i said though that ship has sailed, CBA fixed rates currently sitting at 1 year for 4.99%, 3 years is 6.39% and 5 years is 6.69%.

 

[Flow-Rider]

Not really. Definitely giving money away for free.

At its most basic, (i know you know this) if you're paying interest on a loan, the faster you pay off the loan, the less interest you pay over time. So in a traditional sense by making extra extra repayments, you indeed are are paying it off faster. BUT there's ALWAYS ways to pay even less.

There isn't a really a vector on a long term mortgage where this crosses over and renders the strategy useless unless Indica was going to pay out their mortgage in less years than the mortgage was fixed for. To put that into perspective, that extra repayment would be to the tune of +~14k per month on a 500k loan). At which point the strategy has no weight. However in all other scenarios, you save in interest regardless of what extra you want to pay.

Look at it this way If you wanted to pay off a 30 year mortgage in 15 years, You could still have taken a fixed interest period and pay the loan off within 15 years. You're just deferring when you reduce your balance to three years in (or however long you took the fixed period for).

As i said though that ship has sailed, CBA fixed rates currently sitting at 1 year for 4.99%, 3 years is 6.39% and 5 years is 6.69%.

I don't want to pay any, Lol!

The last home loan I paid off was in under 7 years, it was nothing like the amounts people borrow today but the rate was between 8 and 4.

 

[indica]

e.g. 500k loan at 1.9% is $1824, at 4.4% its $2504 at 6% $2998.

Loan @ $200,000 and I can refinance when I want. Works for me. Thanks for the advice though, may be good if my circumstances were different.

Any hoo, electricity went up, but so did my feed in tariff.. Nearly 10c now.

 

[Squidfayce]

200k, nice spot to be. I remember those days. You could probably take a 10% interest rate and barely feel it.

Electricity currently locked in at 18 and 17c across the two properties until 2023 august. Need to sort out solar befor ethose expire. Seems to be a fair bit of shit to learn.

So far im thinking a ~12kw enphase system and attaching battery later.

 

[indica]

So far im thinking a ~12kw enphase system and attaching battery later.

I have 16.65 into a three phase 12.5 fronius (means I can feed in 10 - 2x5). That one is currently paying $100 a month.

Go big with solar...it's great.

You could probably take a 10% interest rate and barely feel it.

Yes, we have another @ $350,000 which will hopefully be refinanced soon. No income from either but that is another story ....

 

[Squidfayce]

16.65. fk...how many kWh you getting on a good summer/winter day?

Our average usage is around 30kWh. once the AC is on in summer, its gone as high as 60kWh. New place is more efficient, but bigger, so expecting similar usage.

 

[indica]

how many kWh

105 I think is the best so far. Well happy.

 

[Calvin27]

I have 16.65 into a three phase 12.5 fronius

I put about 8.5kW two years ago and did the numbers (with like 14% self consumption), was a no brainer, even with a terrible FIT in Vic. I wonder if the same 'nerfonomics' adds up in favor of solar with the higher rates these days. Probably need a lot more self consumption to make it stack up.