Splitting a fixed loan ... with NAB

Discussion in 'Loans & Mortgage Brokers' started by VB King, 18th Oct, 2018.

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  1. VB King

    VB King Well-Known Member

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    I wonder if anyone has any experience or advice in this kind of situation. We have 6 investment properties with NAB. Our situation is changing and we are moving into one of these properties.

    There is one loan, the purpose of the funds was to settle this property back in 2015. It is fixed until 2020.With us moving into this property, it makes sense to pay this loan off first.

    My thoughts after reading all the useful posts on debt recycling was to create a split, pay one of the splits down to effectively zero, and then redraw to use the monies for expenses on the other 5 properties (eg, rates, strata, insurance, etc).

    I had a conversation with NAB this afternoon, just around the split. NABs position is that to split the loan, they first have to break it ... which totally destroys any potential future benefit during the remaining fixed term.

    My perhaps naive thought was that there really is no difference to NAB before and after the split. Same amount owing, happy to keep both splits fixed to 2020. I.e., from NABs point of view what is the difference between owing 100, or owing 90 + 10?
    (Yes if I later paid a split down to zero, I knew of a possibility there would be a break cost on that split amount).

    Does anybody have a similar experience or advice ... is the information from NAB correct, and if so is there a way around it?

    Many thanks in advance for anyone taking the time to share their thoughts or experiences.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The information you've got from the NAB is correct. It's the same with every other lender as well. To make any change to a fixed loan, you need to break the fixed rate.
     
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  3. Terry_w

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

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    NAB are very painful for this sort of thing
     
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  4. VB King

    VB King Well-Known Member

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    Thanks a lot @Terry_w and @Peter_Tersteeg - at least I know while it may not appear sensible, it is at least correct information from NAB.

    Are there any creative ways around this?

    One thought, what if I just ignore NABs advice and pay down a portion, and then simply redraw it. I believe there is room to make some extra payment on a fixed loan with NAB.
    The remaining loan remains fixed, the redrawn money would be variable. It's therefore easy to identify which money is which. Have I inadvertently created a small split? Or clutching at straws?
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    redraw on fixed might be tough.

    One reason why we dont use NAB much is their eeeeeeeeeek process to split loans

    ta
    rolf
     
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  6. JasonC

    JasonC Well-Known Member

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    I presume you got a quote on breaking the fixed loan? I've asked in the past and was surprised with a no break fee - wasn't a 5 year fixed loan though. Broke the fixed loan, and then re-fixed at a lower rate for similar term.

    Regards,

    Jason
     
  7. VB King

    VB King Well-Known Member

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    Yes - it it totally destroys any potential debt recycling benefit.
     

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