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Offset amount greater than loan account

Discussion in 'Property Finance' started by mc123, 5th Aug, 2016.

  1. mc123

    mc123 Active Member

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    Hi all

    Say I’ve got $150k in the offset account that is linked to an interest only loan of $250k giving it a net loan of $100k.


    If I’m expecting a cash inflow of $120k in the next few months so the net loan is a negative $20k.


    Would that automatically close the loan? If so, should I always have the net loan slightly above $0?


    I’m hoping to keep the loan open so I have access to near-term liquidity.

    Thanks
     
  2. Marg4000

    Marg4000 Well-Known Member

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    No, and the bank would not even say thank you.

    No point in having the offset balance higher than the loan.

    Years ago, instead of paying off our PPOR we simply kept the offset at the same amount as the loan. Repayments were transferred monthly from the offset to the loan as both simultaneously reduced. No interest payable.
    Marg
     
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  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Wouldn't close the loan as its separate accounts.

    Doesn't really do anything really, just doesn't reduce your payments any further.

    You might consider putting the excess into another properties offset account. Repeat until all properties are full ;)
     
    Blueskies likes this.
  4. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Having money above and beyond the outstanding loan balance that is in an offset will not close the account down. It will however be a waste as you can put that money to work elsewhere to gain some sort of return rather than nothing as your offset is maxed out. Perhaps an IP?

    If it is placed into the actual home loan account as redraw and the balance is taken down to zero then in many instances this will close the account down automatically and does vary from bank to bank in regards what minimum sum you need to have in it to keep open? Check with your bank first.
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Does with Liberty. :)
     
  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Ya joking!!! o_O
     
  7. mc123

    mc123 Active Member

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    thanks for your responses. Will check with my bank..
    i've just sold my second IP so will have proceeds coming in which will go into the first IP's offset acc. next place I buy will be a PPOR so will need a temporary parking spot for the time being!.
    Thanks
     
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  8. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Perfect move ^^^^
     
  9. Marg4000

    Marg4000 Well-Known Member

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    And if you are concerned, keep the offset balance a few hundred dollars below the outstanding loan amount.
    Marg
     
  10. Perthguy

    Perthguy Well-Known Member

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    Look at one of the high interest online savings accounts for temporary parking spot. That's what I did last time I was 'between properties'. The interest rates are not terribly good but 3.25% (Rabo) or 3.40% (Citi) is better than nothing.
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    True story.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Just put the excess in a separate bank account
     
  13. JohnPropChat

    JohnPropChat Well-Known Member

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    If you paid LMI on the IP you are selling, you can switch securities to kinda port your LMI to a new property that you'll buy next. Need large chunks but could be useful in some scenarious.
     
    Perthguy likes this.