Was Redraw, now Offset

Discussion in 'Property Finance' started by Bendigus, 6th Nov, 2018.

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  1. Bendigus

    Bendigus Active Member

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    I'll try to keep this as simple as possible.


    I had a PPOR Loan for $200k. with heaps sitting in redraw, reducing the loan to $120k. The sum of all the money that had been added to the redraw over time would have reduced the loan $80k.

    (Yes, I know, in hindsight this was the wrong loan from the beginning, but I can't change the past)

    I refinanced this loan to a different bank. I didn't have enough cash to refinance it to an $80k loan. So instead the loan size was made $150k. This time with an offset account.

    My loan is almost fully offset. The size of the loan continues to reduce slightly over time.

    Let suppose I want to move out of this house, convert it to an IP and buy another PPOR. From a tax perspective, I understand that the only funds that I can transfer are the $80k that was never paid down at any point. But the question is how do I access that money.

    Do I try to wait until the loan to naturally decrease to that size. Do i try to split the loan. I presume the worst thing I could do is to pay the loan down to $80k as that would be just be repeating the error made with the redraw to begin with.

    I have more than enough equity in the property to just add a separate loan of $80k to the property, then pay down the other. But again that doesn't seem right.

    In my case, the end result of what ever happens is not too significant given the size of the loan is pretty small. But I was still curious to hear peoples thoughts.
     
  2. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    So you borrowed an extra $70k? Where did you put this money? Did you split the loan?

    If not what you should do is to split the loan into the relevant portions - which may be $80k and $70k. Get 2 offsets if you have more than $80k cash.

    The interest on the $80k loan may be deductible - you will need tax advice on this.

    If you wish to use the other $70k pay it into the loan and then reborrow it.
     
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  3. Bendigus

    Bendigus Active Member

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    Put it in the offset. At the time it was really more like extra 30k
     
  4. Bendigus

    Bendigus Active Member

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    Thanks so much Terry. I'll investigate this further.
     
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