Drawing on a P&I loan

Hi All,

Im thinking about transferring my Interest only loan into a principle and interest loan to take advantage of the lower interest rate. All I want to know is if after a while I want to redraw on the principle paid onto of the loan, will the bank require a valuation to release the funds? Is it a simple process if the funds I'm trying to withdraw are lower then the principle paid?

Another question I have is, say I pay 50k of principle on top of the loan over a 2 year period and I want to withdraw 50K, but the market has also dropped 50K. Can the bank decline redraw on principle in this hypothetical situation.

 

With a PI loan the balance is constantly decreasing if you pay extra over the minimum you might be able to redrawn up to the reduced limit.

 

And by "pay extra over the minimum" you are talking about the automatic principle debits the bank charges?

 

By pay over the minimum, it means payments you make over the minimum required. Easy to check by calling your lender.

 

The minimum is made up of principal and interest. Extra payments can be redrawn. If you would like to access these minimum principal payments or equity if the property value has increased, you would need to refinance. With new income docs and application form, valuation etc. with the same bank or a new one.

 

No

 

If you owe $400k and your limit is $400k then you pay down an extra $50k, in theory you should be able to redraw this.

The tricky part is your limit will reduce organically as the loan progresses, so by the time you want to redraw the $50k your limit may have reduced to $385k meaning you only have access to $35k.

If the house declines in value this should not affect your loan, you have an approved loan amount and it's very unlikely after draw down the bank is going to tamper with that.

 

have you considered loan with offset feature?

 

The question was whether the principle part of the minimum payment could be withdrawn later.

An offset would not help with that.

An offset might be a solution to adding extra repayments above this and have it readily accessible, but even then it will not reduce the total payments amount and actually increases the principle that you are paying which you can still not withdraw without a new application.

 

I already have the offset account with my current lO loan which will stay an offset once the loan changes to a P&I. If the interest rates weren't so attractive with P&I loans it would be a no brainier but i'm saving .65%. The principle amount only cuts into my disposable income, which is why i asked about the redraw facility on P&I loan, this loan will essential be my 2nd savings account.

 

I think i understand what your saying.

I will only keep it as a P&I loan until i have enough equity to pull out another deposit for an investment which will than change to a IO loan.

Depending on my cashflow and income at the time of the new purchase i will make the decision then whether the new loan will be a IO or P&I loan.

I have decide to use my Brisbane investment for the P&I loan because i believe this to be the highest growth area within my portoflio over the next 2-3 years.....fingers crossed.