Prepaying interest

Discussion in 'Loans & Mortgage Brokers' started by big_ben02, 22nd May, 2017.

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  1. big_ben02

    big_ben02 Well-Known Member

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    I am looking at prepaying some interest this year.

    I thought I would get in a little early to see what the process is and the lady I was dealing with at the CBA mentioned there was no discount for paying prepaying interest.

    I recall in previous years there were discounts of up to 0.20% for prepayments.

    Just wondering:
    - Are the discounts usually only announced in June (when people are usually thinking about prepaying interest)?
    - Are banks removing discounts on prepayments due to targeting of interest only loans by APRA?

    Ben
     
  2. tobe

    tobe Well-Known Member

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    Your actually investigating changing your loan to fixed interest in advance. These loans do have a slight discount. They do take some time to organise, so get your skates on.

    Note, prepaying your variable rate loan doesn't help tax wise and doesn't get a discounted rate.
     
  3. 158

    158 Well-Known Member

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    @wylie is the interest prepayment queen! :p

    Pretty sure she deals with Wesuck though!

    pinkboy
     
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  4. big_ben02

    big_ben02 Well-Known Member

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    I understand it involves switching to a fixed rate loan, but the impression I got from the CBA was that there was no discount on the quoted fixed rates for prepaying interest.
     
  5. tobe

    tobe Well-Known Member

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    Without a discount the ato denies the deduction, as it's a 'scheme'. Try googling cba interest in advance fixed rates and see what comes up, I'd be surprised if they are leaving the market entirely, but it does tally with their apra issues.
     
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  6. big_ben02

    big_ben02 Well-Known Member

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    Individuals are allowed to prepay expenses if it is for less than 12 months. No issue re scheme if there is no discount. see following link...

    Deductions for prepaid expenses 2016
     
  7. Terry_w

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

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  8. tobe

    tobe Well-Known Member

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    I tried google and nothing came up. On my broker software the 1 yr inv IO fixed rate is 4.84% in advance it's 4.39%.

    Not sure why you received diferent advice at the branch.
     
  9. big_ben02

    big_ben02 Well-Known Member

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    I was dealing with a lady via email in their premier banking branch. I followed up by stating that I understood there to be a 0.20% discount on interest in advance and asked if that was still available.

    She replied that with the changes to restrict interest only loans, there are no additional discounts available.

    Not sure if anyone else has had the same answer?

    I have another question - I have another loan that is part way through a 5 year fixed rate. Can I prepay the next 12 months of interest at that fixed rate, or can you only select interest in advance at the start of a fixed rate loan?
     
  10. Terry_w

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

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    No extra discounts, but you will have a special 1 year fixed rate.

    Banks generally only let people fix for whole years. But you could break the fixed rate and refix it for 12 months. They may even discount the break costs.
     
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