Commercial Loans

Hi,

Long team reader, first time poster.

I've recently taken out a commercial loan for a commercial property I purchased last year with NAB at an excellent rate. I have some extra cash lying around doing nothing - so I've been exploring options and it seems to me that an 'offset' account is quite popular with people in the property market.

I've contacted my bank (NAB), whom have advised that 'offset' accounts aren't available for commercial loans, so it got me thinking, is this a norm for all banks in the industry? I am yet to contact any other banks and wanted to gain a further understanding of how banks in the commercial industry interms of offset accounts work with offset accounts - are they a complete NO NO?

Look forward to your responses.

 

Prob the best bet is to try something like this Lease Doc Commercial - Or How I learned to love Lease doc to continue investing

 

Hi D.T,

My bank supplies a 'redraw' facility, which in essence works similar to an offset account by the looks of it. Basically I need to supply my bank with 2 - 3 days notice of requesting a 'redraw', ill take a look at Lease Doc Commercial - thanks for the link.

 

A redraw is not the same as an offset account. The amount of funds in an offset account 'nagates' that amount in a loan to which the offset account is linked. That is- if you have an offset account with 10k in it and it's linked to a loan of say 100k, you are effectively paying interest on 90k. A redraw is a facility that allows you to 'put out' funds from a loan. Usually funds that were paid ahead of their required time frame. Offsets usually offer more flexibility as you can use the money at any time. Redraws generally will need more time (2 -3 days in your case) to be processed.

 

Suncorp is the only lender that will allow an offset under their commercial lending. They also have a variable product @ 4.39% if the lending is under $1mil.

However their loan term is 15 years. This is an important consideration as some lenders will do a higher rate but also a 25 or 30 year term. This means that your monthly repayments are much lower.

When it comes to commercial lending (much like most forms of lending) there is a little more to it than just rate.

 

Hi York,

Thanks for your response, ill give you some further information regarding how my current loan is structured, it's a 'Business Loan' from what I gather, anyhow I have 2 accounts with NAB

• Everyday account (this is just like a normal bank account, does nothing besides incurs the normal monthly fee's, withdraws interest on the loan and accepts 3rd part payments from tenants)
• Loan account (where the monies reside for the principle of the loan)

For arguments sake, let me use an example (numbers are falsified):

• Loan is an interest only loan.
• The loan account is for a total: 1M
• I've currently paid off 700k + interest of that 1M.

NAB only request that I pay interest on the 300k (remaining balance of my current loan), from my understanding is that I can redraw that 700k that I've added to the interest only loan, from there I can then:

* Increase my current loan on my current equity (will need to get my current commercial building evaluated).
* Withdraw a further 70% on a new commercial building worth 3M (2.1M)

So in essence, I should be able to gather:

Redrawn amount - 700k
Equity from current commercial building - 700k
New commercial loan on new building - 2.1M
Total: ~3.4M

If I am misunderstanding anything please let me know.

 

I've just had a chat with @Shahin_Afarin by phone, to say the least his answered all my questions very thoroughly and gone above and beyond, he'll be sure to get my business as a broker - thank you kindly!

 

That's great to hear. Everyone's individual circumstances are different and having an excellent broker can make all the difference. Good on you for getting in touch with someone. Having a great team around you is paramount in your journey. @Shahin_Afarin is a gun broker. Goodluck.

 

To answer the initial question. It is possible to have an offset account on residentially secured business loans with ANZ (unsure on other banks sorry)

 

I've had offsets here and there with commercial, but normally they're redraws.