How are paid down loans treated

Discussion in 'Loans & Mortgage Brokers' started by Oshawott, 13th Jul, 2016.

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  1. Oshawott

    Oshawott Well-Known Member

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    Just wondering for example you have a 500k loan. You pay it down to 490k only so as not to close it.

    Question is, when you apply for new loans, do banks calculate your existing loan as 500k, or just the 10k unpaid?
     
    Oshawott, 13th Jul, 2016
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The limit
     
    Terry_w, 13th Jul, 2016
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  3. Mumbai

    Mumbai Well-Known Member

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    With contempt :)
     
    Mumbai, 13th Jul, 2016
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  4. Corey Batt

    Corey Batt Well-Known Member

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    They will calculate it off the full limit - the same goes if you have funds in an offset (for example a 500k loan with 500k in offset), the loan will be counted as fully drawn and the fully repayment liability factored in.
     
    Corey Batt, 13th Jul, 2016
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  5. TaylorChang

    TaylorChang Well-Known Member

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    If you have withdraw facility set up for your loan, which means you can withdraw your 10k anytime. Then it means bank will calculate $500,000 as your existing loan.

    $10,000 is really not much difference in term of existing loan amount. For the servicing calculation point of view, any two banks can easily have $10,000 difference in serviceability of their calculators.
     
    TaylorChang, 14th Jul, 2016
    #5
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    All lenders will look at this as a contingent liability, as most do with credit card limits.

    Some brokers and bankers in need of end of month budget may convince you that you dont need to list the limit, only the actual owed amount................ not a smart thing to do long term

    Its sounds as yourquestion is more specifically around serviceability which can often be overcome with smart structuring and/or using lenders that you may not be familiar with

    ta
    rolf
     
    Rolf Latham, 15th Jul, 2016
    #6
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    They take the limit - because that's the amount you theoretically have access to.

    They'll also apply a loading to that loan - ie a higher rate (7%+) and possibly P&I repayments.

    Cheers

    Jamie
     
    Jamie Moore, 15th Jul, 2016
    #7
  8. albanga

    albanga Well-Known Member

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    So on this, is it just a matter of ringing the bank and saying "I have 50k in redraw" can you just drop my limit.

    Or would this trigger a whole new application?
     
    albanga, 15th Jul, 2016
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  9. kabirthapar

    kabirthapar New Member

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    If I don't have withdraw facility set up for my loan, then what do I need to do?
     
    kabirthapar, 18th Jul, 2016
    #9
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    m
    Most lenders simply allow you to complete a form to reduce the loan limit

    Some lenders then also allow a recalc of the PI repayment to the lower limit

    ta
    rolf
     
    Rolf Latham, 19th Jul, 2016
    #10
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