Dealing-with-bank advice.

[groak]

Very soon I'm signing up to refinance my 2 loans with RBS. The basics have been tentatively agreed, which are to turn the 2 (one IO and one cap-and-int) loans into 1 cap-and-int, and to further a 5-year facility on a 20 year profile. However, there are a host of options on how to arrange it. 3 year fixed or 5 year fixed or variable or variable just now with an option to alter later etc etc etc.

I quite fancy getting some advice on the matter. But does such advice exist? Is there any scientific way of determining optimum loan terms for any individual? Or is it all just a giant speculative guess and shot-in-the-dark?

If there IS such advice, who gives it? I keep an in-house tax accountant, but he says it's not his special subject. And most 'financial advisors' are just snake-oil salesmen aren't they? So who/what kind of firm dispenses loan-terms advice?

[Jonboy_t]

I think that given what's going on with the economy at the moment, you may as well lick your finger and see which way the wind is blowing. Although things are supposed to be on the up, there are two schools of thought about what the ramifications of this are - firstly, people are spending more, so lets put interest up to claw some money back into the economy (i.e. you would be better fixing the rate now whilst it's low), secondly, people are spending more, so lets keep the interest rate low so they keep spending more and more (in which case variable might pay off, but unlikely, so fix it again).

In essence, the decision isn't one that anyone could really give you a 'X will happen' or 'don't do Y as Z will screw you over' etc!

Personally, I would want to be fixing a rate whilst I know the rates are at the lower end of the market (for borrowers, not for savers!), but i'm pretty risk averse so that may not be the way for you!

The only advice I would categorically give to anyone borrowing money is to pay it back sooner rather than later! If you look back to 80's, the rates increased dramatically in a relatively short space of time (I'm too young to know, but I think 17/18%?) so you could be in for a shock this time in 5 years when your low% fixed comes to an end and you end up paying 20%, so get rid!

[loafer123]

groak said:

Very soon I'm signing up to refinance my 2 loans with RBS. The basics have been tentatively agreed, which are to turn the 2 (one IO and one cap-and-int) loans into 1 cap-and-int, and to further a 5-year facility on a 20 year profile. However, there are a host of options on how to arrange it. 3 year fixed or 5 year fixed or variable or variable just now with an option to alter later etc etc etc.

I quite fancy getting some advice on the matter. But does such advice exist? Is there any scientific way of determining optimum loan terms for any individual? Or is it all just a giant speculative guess and shot-in-the-dark?

If there IS such advice, who gives it? I keep an in-house tax accountant, but he says it's not his special subject. And most 'financial advisors' are just snake-oil salesmen aren't they? So who/what kind of firm dispenses loan-terms advice?

There are specialist financial restructuring advisers - most used to be bankers, who I know aren't your favourite flavour...

FWIW, the following is NOT financial advice;

1 - Hedging - my personal view is that out of the money caps are far better than swaps / fixed rates, particularly if interest rates remain low, which is, IMO, likely. They will give you free cashflow to amortise with (or take out, but I would guess you may have a cash-sweep of free cashflow after management costs), but the ability and flexibility to sell when opportunities come along.

2 - Amort - If you are on a 20 year profile you have a relatively modest amort profile anyway, so not much to play with there.

3 - Margin - Final factor is margin - can you squeeze them - is it worth paying bigger fees to get a lower margin?

In the good old days you could have tried for substitution rights, (draw, repay and redraw), but I'd be surprised if you could do that now.

HTH

[groak]

loafer123 said:

There are specialist financial restructuring advisers - most used to be bankers, who I know aren't your favourite flavour...

FWIW, the following is NOT financial advice;

1 - Hedging - my personal view is that out of the money caps are far better than swaps / fixed rates, particularly if interest rates remain low, which is, IMO, likely. They will give you free cashflow to amortise with (or take out, but I would guess you may have a cash-sweep of free cashflow after management costs), but the ability and flexibility to sell when opportunities come along.

2 - Amort - If you are on a 20 year profile you have a relatively modest amort profile anyway, so not much to play with there.

3 - Margin - Final factor is margin - can you squeeze them - is it worth paying bigger fees to get a lower margin?

In the good old days you could have tried for substitution rights, (draw, repay and redraw), but I'd be surprised if you could do that now.

HTH

Thanks for that. I'll try googling 'financial restructuring advisers'. Also agree on the oom caps, but would like a pro with the numbers to crunch to guide it. The sub.rights option is dead in the water, and squeezing margins probably the same. 'Flexible' isn't a word Head Office uses much these days.