SMH article - "withdraw money from your redraw now"

I believe that the article has some (limited) basis of credibility but if the banks just cleared redraws there may be a massive impact on the financial system. Its different to, but not dissimilar to the concept of a bank just taking savings and paying down a loan. And if its a single lender it just invites the person to seek new finance with a different lender to re-access their past equity so it would harm that bank.

A $10K customer ahead of payments is very different to a $500K loan which has been repaid by $499,900 so that a $499.900 redraw exists. It may make sense to the undrawn facilities to be reset to limit lender exposure BUT it seems a major change to T&C for any lender to just end the limit.

I have always questioned if redraws could be managed differently. eg If the lender permitted redraws of say $20K or more only on approval. So that any redraw remained "available" BUT subject to lender approval of things like present employment, income to service or property value changes.

I could see a change like that being more palatable but still unpopular

 

this was interesting for me, I have an 'offset' account with Pepper Tree which has a monthly fee. It seems this could be more a quasi-offset account that is more like a redrawal. Not saying its likely but it would be a risk if the company goes under

 

Scare mongering. If you read the article its talking about CBA's changes to redraw which happened a while back.

If your $500,000 loan has contracted repayments of $2387/ month P&I over 30 years and you put $200,000 into redraw then with CBA your repayments will reduce to $1432 / month. The difference of $955 will come off your available redraw each month. Net effect you pay the loan off in the 30 years regardless of what you then do with redraw.

Their old method had the potential to leave people in technical arrears with massive repayments because the redraw amount was not reduced over time. Using the same example above say after 25 years you redrew the $200,000 this would mean you have 5 years remaining to repay the $200,000 + $129,000 balance owing on the loan at that time. So repayments would jump up to $6059 / month. You can see how this would be a problem.

Most other lenders I know of the P&I repayment never changes so this isn't ever an issue you juts pay the loan off quicker.

What Rolf says is so true.... "loans aint loans" !!

 

Yet another reason why a broker can add value

 

Nothing wrong with paying off your loan and have no access to it, force saving
That why you paid extra repayment in the first is it not? to reduce your debt and eventually wiped it out?

 

You are referring to Cyprus (its a little bit more complicated than that as the money was mainly dirty Russian slush funds....but yep it does happen).

Its called a "bail-in" ....and yep does happen though not often.

Keep in mind it also happened recently with a bitcoin exchange (OKEx) that had a speculator go tits up.....oh you mean you didn't read the fine print on your T&C's contract.....shame about that.
OKEx Confirms ‘Clawback’ On Huge $400m Bitcoin Position, Introducing New Measures | CryptoGlobe

Some more general "bail-in reading"
New Financial Crisis Laws: G20 Bank Bail-ins, Money Market Fund Freeze

 

Um...are you saying fake news exists....or that there are slow news days where you need to fill a void ?

 

I just don't pay much attention to journalists these days I see so many things they report as fact being completely wrong when your well versed on any specific thing, it is like being thorough and correct as possible is very optional...and very optional is very loosely used,

Or you see them talk to some expert, say in the property game that may be some pimply faced kid who fancys themselves on tv or in some media, and what they say is repeated/reported as gospel.

But there are some far worse things, but it has you realising they highly likely have the same mode of operation with very important things, and in fact they do.

Anyway, my comment was more of a joke, so don't wind me up

 

CBA have been named in todays news (SMH). They are planning to sweep redraws and make all loan applicants apply for a new loan to increase present balances from 1st September 2018.

 

For those who may just draw the funds out some care must be taken or future tax deductions could be lost. Cant be mingled with savings. Ideally a clean offset linked to the loan but I imagine CBA will put up blockers to the simple option if someone doesnt have a offset today ?

 

Wait, so if I have say, $50K in redraw, I should withdraw it right now? Where would you put it - where its safe and offsetting interest, and untouchable?

Or, I could just start investing those $ elsewhere.

 

Depends, Buying shares that dont pay divs is non deductible anyway.

 

It would def be dividend paying stocks. But is the message to clear out the redraw right NOW before it gets locked?

 

SMH article - CBA to 'sweep' Australians’ redraw money on September 1

CBA update - How redraw will work over the life of the loan

Long story short - CBA will change your minimum monthly repayment based on the funds sitting in redraw.

If you want to hold onto those funds for something else and/or just want more control of your money it's prob best to have additional funds sitting in a linked offset.

Cheers

Jamie

 

So a redraw where the minimum repayments stay the same regardless of how much extra is sitting in redraw is not affected under this model, right?