Case Study – Commercial Office Purchase Made Easy

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Commercial Office Purchase – Finance Made Easy

Background

James and Brian were referred to First Point Group by a friend.  They run an office based business, and wanted to purchase the premises they were currently leasing. The office was in a high quality eastern suburbs of Melbourne location. The purchase would enable them to own the premises and effectively pay rent to themselves.

Keys to buying a Commercial Premises

First Point Group takes pride in being able to offer our clients solutions for all their finance needs, no matter how simple or complex.

The clients had considered multiple options with assistance from their Accountants and Financial Advisers, including the potential to purchase the office as a superannuation investment. Their advisers recommended that they purchase outside of superannuation via a Unit Trust structure.

The Challenges

James and Brian had an existing Business Bank ‘relationship’, however they felt that their Banker did not understand their business. Their Banker had also changed several times over the past 5 years. James and Brian were interested to know what finance options were available from a range of competitive commercial lenders.

Due to other commitments, the clients required a higher than usual Loan to Value Ratio (LVR) of 75%. Many mainstream commercial property lenders / banks prefer 60-65% LVR, which forces the business / investors to contribute a lot more capital upfront.

The Solution

First Point Group was able to arrange a Commercial loan pre-approval to enable James and Brian to negotiate on the purchase price, rather than negotiate without finance approval. This pre approval was incredibly valuable as James and Brian were able to enter negotiations with complete confidence. We also secured a loan at 75% LVR with a very competitive interest rate and fee structure.

James and Brian intend to also try and secure the adjoining office space over time. First Point Group are assisting them to understand their potential borrowing capacity.

If you would like to talk to the team regarding your next purchase, review or refinance whether you are seeking residential, commercial or asset finance, please contact us to find out how we can help you.

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Interest Rate Update – October 2016

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No change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.50%.

The price of oil rose to almost $US50 a barrel last week, following a decision by the Organisation of the Petroleum Countries (OPEC) to cut production for the first time in eight years.

This, together with some recent solid economic results, has influenced the RBA to hold off any changes to the cash rate in the short term.

The next key financial data will be the release of the quarterly inflation figures on 26th October – a very good guide for the RBA to use to decide if to further reduce the cash rate in November.

For more information, or if you would like a free review of your residential, commercial or SMSF loans against other competitive products in the market please contact Peter, David or Simon via this email, our phone: (03) 9882 2500, or visit https://www.firstpointgroup.com.au

A Successful & Complex Refinance

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Background

First Point Group takes pride in being able to offer our clients solutions for all their finance needs, no matter how simple or complex. We love a good challenge and this article shows how we overcame exactly that for one of our many valued customers!

Recently, First Point Group was faced with a complex refinance application for a client with multiple loans; both investment and owner occupied, as well as an application for additional finance at the same time. The client’s ultimate plan was to borrow to demolish their property and build their dream family home.

The Challenges

Borrowing Power – Our first hurdle was our clients’ existing lender would not lend sufficient funds to finance the construction. As we do for all of our clients, we then widened our focus to include a range of competitive Lenders who could potentially provide more flexibility.

Best Interest Rate – In order to achieve the best possible interest rate, it was beneficial to have all of the clients’ loans with the same lender, including the existing loans as well as the construction loan. In a way this is like “buying anything in bulk” – you would expect a better discount.

Refinancing Costs – Importantly, we found that several of the existing loans were locked into fixed interest rate contracts, so there were going to be significant “break costs” if we chose to refinance these loans. In order to go through the cost of refinancing to another lender, it had to be worth it. The interest savings would need to repay these costs within a relatively short period (ie. 12-18 months).

To meet the needs of the client, and overcome all of the above mentioned issue, we had to:

  • Research for a suitable lender based on product features, Lender policy and serviceability limitations
  • Calculate the refinance savings achievable by switching to each potential lender
  • Calculate how long it would take for our client to recover the “break costs” if they were to break their fixed interest rate contracts. Depending on the size of the loan, and length of time remaining for a loan with a fixed rate of interest, the costs of breaking the contract can be tens of thousands of dollars!

The Solution

We were successful in working with the client and negotiating with the right Lenders to enable a complete refinance of all loans, which provided the capacity to fund the construction, and also recover the break costs within a 12-18-month period. The client was moved to loans with far superior interest rates, and the construction of their home is currently underway!

This is one of the many loans First Point Group have had approved where persistence is the key to achieving that final approval. Our highly experienced team will always anticipate (where possible) and overcome any challenges to meet the needs of our clients.

If you would like to talk to the team regarding your next purchase, review or refinance whether you are seeking residential, commercial or asset finance, please contact us to find out how we can help you.

Interest Rate Update – August 2016

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Cash Rate – Reduced to 1.5%

The Reserve Bank of Australia (RBA) has just announced it will reduce the official cash rate to 1.5%.

In a finely balanced decision the RBA would have been particularly influenced by the results of the June quarter inflation rising only 0.4% and hence only 1.0% over the twelve months to the June quarter 2016. This compares with a rise of 1.3% over the twelve months to the March quarter 2016.

With inflation running well below the RBA target band of 2.0%-3.0% and the labour market having lost momentum over recent months the RBA felt it was time to move rates down again.

The RBA will update its forecast outlook in the Statement of Monetary Policy on Friday 5th August which will provide some reasoning behind their “cut” decision and paint a picture of the near future.

As we see interest rates continue to fall, the next 12 months will be very interesting times. Despite three cash rate cuts of 25 basis points each since March 2015 there has been little benefit to the economy and other macro tools are likely required to refire the economy. Two things are for sure:

Interest rates are historically low so borrowing is very cost effective

There is not much left for the RBA to play with…

For more information, or if you would like a free review of your residential, commercial or SMSF loans against other competitive products in the market please contact Peter, David or Simon via this email, our phone: (03) 9882 2500, or visit https://www.firstpointgroup.com.au/

Interest Rate Update – July 2016

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Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.75%.

Notwithstanding the uncertainty surrounding both the Australian election outcome and the aftermath of Brexit the RBA has a preference to await the results of the June quarter inflation figures (due later this month) before considering its next move. The majority of Economists are currently predicting the RBA’s next move to be a reduction to the Cash Rate in August.

Interest Rate Update – June 2016

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Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.75%.

This follows last week’s better than expected GDP figures which showed annualised economic growth at 3.1 per cent.

It is interesting to note that business lending has been growing at a slightly higher rate than housing lending, the first time this has occurred since early 2009. The reasons for this have been the current low interest rate environment, an improvement in overall business confidence together with the influence from the regulatory body, APRA, as they continue to push the Lenders to reduce their growth in mortgage investment lending.

We see no change to the Cash Rate in the short term, although many Economists are expecting another reduction before the end of the year.

Interest Rate Update – May 2016

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Cash Rate – Reduced to 0.25%

The Reserve Bank of Australia (RBA) has just announced it will reduce the official cash rate to 1.75%.

The weakness of the March quarter’s inflation figure (-0.2%) shocked many Economists. This was the first time the headline inflation rate has fallen since December 2008 and the resultant annual inflation of 1.3% is the lowest since June 2012. Fuel and fruit prices were the main influences however slower price rises in the regulated sectors such as utilities, health insurance and rates together with low wage growth have contributed.

Low interest rates have been supporting demand and hopefully a lower exchange rate as a result of this reduction will further assist the economy.

 

Interest Rate Update – April 2016

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Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 2.00%.

Notwithstanding a strong Australian dollar the RBA remains comfortable with a contained inflation rate and a slowly improving labour market. Business credit has expanded (0.7% for the month of February) resulting in an annual growth rate of 6.5% (up from 5.5% for the year to February 2015). Housing credit remained at 0.5% for February (7.3% for the year compared to 7.1% for the prior year). The Australian Industry Group manufacturing index also delivered positive news last Friday morning showing an improvement of 4.6 points to 58.1 – the highest level since 2004.

Whilst we remain confident the cash rate will be left untouched for the remainder of 2016 the RBA will keep a close eye on a strengthening Australian dollar.