Instant Arrears from redrawing of loan account - CBA

Hi All,

Just thought I would share a hairy experience I had with CBA today regarding drawing down on a home loan.

Late last year I pulled equity from an IP and created a split of $35k to pay off a car loan.
The account has a 100% offset facility which I had $35k of my own cash in there to avoid paying interest (as it is non tax-deductible).

Gearing up for another purchase I attempted a method shown/discussed by many on the forum: pay down the loan (obviously not until $0 balance as this would result in the loan being closed) and then redraw that amount back into the offset to use for investment purposes.
This would then enable the interest accrued to be tax deductible against the new investment (in this case a property).

So I called CBA contact centre to enquire about the minimum amount I could pay the loan down too without risking closure and they gave me a figure of $500.
Wanting further confirmation, I dropped into my local branch and speaking with a lending specialist, was told the figure is $75 - which she obtained by calling the loans department from an internal line.
Due to the discrepancy in amounts, I requested written confirmation but was refused on the basis I personally heard the $75 figure quoted over speaker phone.

So I went home and proceeded to transfer $34900 (just to be safe) from the attached offset into the loan followed by redrawing the same amount back out into the same offset account.

Well.... got a call today from a private number; on the other line was a CBA officer from the Finance Assist team wanting to discuss 'an issue regarding my private banking'.
I was somewhat taken aback when he advised I had a payment of $34900 due on my home loan!
He explained the reason for the call was that the amount due was inconsistent with my payment history with CBA so he decided to call me to clarify the situation as part of his investigation.

I explained to him the events above and told him I was acting on advice given to me by CBA staff. He then placed me on hold and came back to advise he would lodge a request to wipe the arrears amount and for me to continue to make my regular monthly payments for that loan (in this case $0 due to loan amount being 100% offset).
More concerning however, is his confirmation that any amount redrawn from the loan would need to be put back immediately or else entire amount would be payable from the date withdrawn.
Most worrying though is the fact I was not informed of this by two separate sources working for the same bank. Fortunately for me, my payment history is quite good so the Finance Assist investigator took the time to call me for further clarification. Without this, the situation may have turned much more messy.

Needless to say I was quite shocked by the information given to me on the call regarding redrawn funds. I'm unsure if this is specific to CBA only but I also bank with STG and don't remember having come across this.
I've checked the offset is linked correctly to the loan and this is confirmed by me not having to pay any interest since the split was created.

Has anyone else experienced a similar case?
My advice to all is ensure you check carefully before moving any money around in the event charges are incurred, arrears are activated and/or explanation is required.
Could prove costly if in the middle of the finance stage for a purchase.

Hope this helps others avoid the same/similar headache.

Cheers
BB

 

Hi @bread_boy
Thanks for sharing
Did you have the 'redraw' activated to enable you to 'redraw' the funds?

 

Hi Twins,

Good question. I'm not sure if this was done by my broker upon creation but is there a way I can check that via Netbank?

 

Not sure if you can check that via Net Bank - but recently we had a client put money in (and left $100 owing), then withdraw it the next day - we got him to call CBA and have them activate his redraw account before he did any of this.

 

Sounds very strange to me. Perhaps it was a fraud alert that prompted them to check with you.

 

A little similar, I paid a $15k split to $14,999 and Netbank said i was in arrears by $1 and am required to pay it by a certain date.
CBA told me their system got confused and would fix it within 7 days.
But i will make sure that redraw is 'activated' before attempting.

 

Sounds like that is what happened to me - redraw must not have been activated.

Memo to all: Please ensure your redraw is activated prior to moving money around!

 

Been digging around on the CBA Netbank and can't seem to find it. If anyone does stumble across please do share.

 

Westpac have boxes to tick on submission, not sure about CBa but I can't recall any special requests being needed. I think it just a feature of the standard variable rate.

 

lol...dealing with lenders, anything is possible, they tell you different things, just get it in writing.

I was told no less than 3 times that a redraw facility I had on loans was no longer relevant due to lending changes, after an official email and follow up on phone, all good, but I think they may be trying to force people to do things they want even though the loan policy is different.

 

What is the loan type? Economiser / Ratesaver. If so and was initially interest only then that may be the issue as redraw isn't allowed on these loans during the IO period..Or possibly an older fixed rate loan now variable?

With a standard variable I dont think this would happen. Personally I've paid down down CBA loans to $1 and redrawn no issues. I've also advised a lot of clients to do same no issues.

 

Just remembered you had an offset so couldn't be the economiser / rate saver. Hmmm