Refinance offer - have a missed anything in my calc?

Discussion in 'Loans & Mortgage Brokers' started by Jasper, 4th Mar, 2020.

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  1. Jasper

    Jasper Well-Known Member

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    I've got two properties I could refinance to take advantage of cashback offers. Instead of moving both to one bank and getting $4k + $2k with Bank Melbourne, I'd move one there and the other to NAB to get another $4k.

    Here is my thinking:
    Property 1:
    -$400 discharge fee (macquarie)
    -$X vic government fees - anyone know what these are?
    +$4000 cash back (NAB)

    Property 2:
    -$4000 fixed rate break fee (ME bank)
    -$X vic government fees - anyone know what these are?
    +$3123 interest rate saving from moving to a lower rate for the remaining 10.5 months of the fixed period
    +$4000 cash back (Bank Melb)

    Any feedback is welcomed. Thanks.
     
  2. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The discharge fee and the break fee are deductible assuminbg these are IPs.
    Any existing borrowing expenses become deductible too
    The cashback is not assessable (as it relates to borrowing, not investment income!)

    Using some quick calcs the net effect of the refinance could add cashflow of $8k plus the tax effect on taxable income (due to rate savings and deductible cost differences) over a full year of $1277 x say 40% = total cashflow benefit of $8510. Kaching.
     
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  3. Jasper

    Jasper Well-Known Member

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    I didn't even think of deductibility of fees (yes, both are IPs). Thanks for adding that into my calcs!
     
  4. Christina46

    Christina46 Well-Known Member

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    My experience with cashback offers is that they get paid into the loan account (ie reducing the balance) rather than into an account of your choice. - Is this the norm?

    Cashback would be far more appealing if you could actually get the cash to spend (don't want to redraw from loan and create mixed purpose).
     
  5. Brady

    Brady Well-Known Member

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    Not sure on all banks. CBA cashback > repayment account (everyday/offset etc)
     
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  6. Christina46

    Christina46 Well-Known Member

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    Good to know @Brady. My experience was with Westpac. Might have been who I was dealing with at their end as well.
     
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  7. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Westpac do put it into the loan account which is a bum if you want to use it for something! They all have their quirks about how they do things!
     
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  8. Christina46

    Christina46 Well-Known Member

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    Thanks for the clarification @Jess. Would certainly be nice to have been able to put it towards a holiday, but c'est la vie. :)
     
  9. Watson1

    Watson1 Well-Known Member

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    Two annual fees charged and both these lenders price based on total aggregate lend and in addition, BoM rates are lower and they assess loans a lot quicker.

    You could probably settle with BoM within 2 weeks as opposed to ~2 months with NAB...
     
  10. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Realistically the intention of the cash back is to cover your costs of refinancing. Practically speaking the refinance costs tend to be capitalised onto the new loan. Hence it makes sense that the compensation would be paid onto the new loan so you're not paying interest on the refinance costs for the next 30 years.

    Sorry, it's not intended for you to take a holiday. That might not be 'responsible lending'.
     
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  11. Beano

    Beano Well-Known Member

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    That's good news to me ...I would have thought cash back was assessable ie offset against interest charge
     
  12. Never giveup

    Never giveup Well-Known Member

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    Are there any lenders who can beat NAB's IR and cashback if interested to Refinance PPOR and pull some equity...
     
  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    For sure

    ta
    rolf
     
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  14. bobbyj

    bobbyj Well-Known Member

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    I was under the understanding the break fees and discharge fees are only deductible from the capital gains once you sell the IP as opposed to claiming a deduction at the end of this financial year.
    Happy to be corrected as my accountant advised me that...
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney

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    No.
    S 25-25 and s25-30 itaa97
     
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  16. bobbyj

    bobbyj Well-Known Member

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    Thanks @Terry_w
    I found your posts from 2016. Gold.
     
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