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Offset account & Serviceability

Discussion in 'Property Finance' started by Raydar, 18th Mar, 2016.

  1. Raydar

    Raydar Well-Known Member

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    I'm interested how the banks view offset accounts and how they effect serviceability calculations.
    Say Joe Citizen has their PPOR with an IO loan of 500k and Offset of 200K.
    Will they calculate serviceability as the same as if they has a IO of 300K?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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  3. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    They assess the whole loan - offset is not taken into consideration at all.

    It's fairly logical. They assess debts on their limits, else the client can get approved and that night blow it all at the casino and have a portfolio they can no longer afford.
     
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  4. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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  5. Raydar

    Raydar Well-Known Member

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    Great, gives me something to think about.
     
  6. Raydar

    Raydar Well-Known Member

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    On the same line of thought, performing an equity release on a property. How do the banks view this. Say you want to park the money for future deposit, so new IO w/ offset and not commit it as yet.
     
  7. albanga

    albanga Well-Known Member

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    ORRRRR Double up and pay off your mortgage?
     
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  8. JacM

    JacM VIC Buyer's Agent Business Member

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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    Blasphemer!!!! No one pays out deductible debt! :p
     
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  10. Terry_w

    Terry_w Tax and Structuring Lawyer Business Member

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    THey will look at the total debt.
     
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  11. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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  12. Raydar

    Raydar Well-Known Member

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    Thanks for all your comments. I have a better understanding of how the world works now.
    Cheers.
     
  13. York

    York Finance Broker Business Member

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  14. Delfredo

    Delfredo Member

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    Interestingly, say loan is $1m, offset balance is $800K, if you ask your existing lender for a re-price (because landscape has become more competitive than 3 years ago) the lender will take the offset balance into consideration and argue that they only earn interest on $200K and will price you accordingly. They are unlikely to try to bring to the table an offer that is competitive for a $1m loan. Until you step forward and walk away. By then often it's too late for the lender to keep you.
     
  15. albanga

    albanga Well-Known Member

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    To get around the redraw issue do you simply request your bank drop the limit to match the balance? If so how hard is this? Surely they don't need an application or to assess income on a lower amount.
     
  16. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    That's fairly easy with most lenders.
     
  17. Terry_w

    Terry_w Tax and Structuring Lawyer Business Member

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    Yes you could, but then you won't have access to the funds anymore (naturally!) and to reinstate it would be a new application. There should not be a reassessment to decrease a loan limit.