Current LOC rates

I have an I/O LOC which will expire in a few months time so need to look around at refinancing.

What rates are people currently paying for their LOC?

LOCs don't seem to be as common as they once were, and even my business banker at NAB asked me what an LOC is!

Tools

 

Majority of lenders have pulled out of this product a few years ago.

 

Yeah you would be best to change products possibly. You would be looking at around 4.5%

 

Are there comparable products available now with the flexibility that an LOC offered? My LOCs have always worked like cash (except that I have to repay it) from the point of view that there are no restrictions on deposits or withdrawals
.

Tools

 

What sort of flexibility? A IO loan with redraw could work the same potentially and be better

 

Flexibility to withdraw any amount (up to the limit) at any time, make repayments of any amount at any time as long as the interest is paid every month (although the LOC I had with NAB 10 years ago allowed interest to be capitalised). So essentially treat it like cash in the bank and from what I have seen loans with redraw they often limit the $ amount or number of transactions.

Tools

 

Yes that could all be done with an IO standard variable product, at a lower rate and better conditions.

 

Thanks Terry

Tools

 

Tools - get the right tool for the job . With IO terms now capped , evergreen IO Lines Of Credit are redundant.
Take out a simple variable product on IO terms for 5 years with redraw or offset and you’ll have the same functionality for less money . Go through reassessment after 5 years of IO lapses and hope that rates ( and assessment rates ) have not disqualified you from getting an additional 5 years of IO at your existing lender or refinancing out to a new lender with 5 years IO. You are no living in a 5 year IO cycle for all intents and purposes

 

4.95% on a relatively small LOC.
Loans with redraw tend to have some conditions and amount rules.
So not as flexible in most cases imo.

 

One LOC is 3.3%. which is BBSY (Bank Bill Swap bid rate) plus 1.6% margin and there is a 0.5% line fee on loan limit. with West Pac. Another LOC with BoM is 4.67

 

True LOC's had 30 year IO periods, no longer exist, Suncorp were the last offering this I believe

 

LOCs are (were?) great! I didn't know they were out of vogue.

No need for savings buffer, plus once setup instant access to cash and no cost if not used.

When I was working I had several LOCs with access to around $2M. It allowed me to make cash offers on properties and then obtain finance. In some cases I didn't re-finance until after settlement. (NB: I still have these LOCs but obviously could not apply for them having since retired.)

I can't see how a IO standard variable product would have given me the flexibility that LOCs did, but maybe the products are significantly different these days.

 

LOCs also created a tax nightmare for many

 

I'd say it depends on how it's dealt with.
If you want to be precise to the last dollar...then good luck.
If you round down it all down and renounce a small deduction, not so much.

 

What some used to promote was paying your wage and income entirely into the LOC each month, using a credit card to pay for things and keep the loan lower longer saving daily interest.

By doing this interest was saved, but the loan became mixed and mixed with each wirhtdrawl so that when the property was rented out virtually none of the loan interest would have been deductible but there would have been a large balance still