I have a new home loan with ING one month old. I have just put $10k lump sum on the mortgage which automically goes into the Redraw account.
If I want to put this on the Principal I have to fill out a form to have it transferred to the Principal but only when I have a minumum of $5K in the Redraw. The contractural minumum payment remains unchanged unless I transfer the Redraw to the Principal. (I realise that I can not then go & redraw the amount for the Principal as once it is in there it stays). I can see the Interest payable falling, and the Balance falling, but not the contractural minimum repayment.
I am not a maths wizz, but what I would like to know is what advantage is to ING to have this $5K minimum rule. Am I being ripped off?
When I had a loan with Wizard, I would watch my contractural min. fall every time I transferred a lump sum. I still made my usual lump sum payments of course and never just paid the min.
Does the maths work out the same? I just can't get my head around it.
Check out the term of the loan. You may also need to check if you are ahead of the loan repayments as this can be recorded also by the bank.
I am $20,000 ahead of my loan repayments with my home loan.An extra payment of 5k of the principal amount will not change your repayment amount automatically but it will reduce the term of your loan in the long run if you keep paying the same repayment..
5k saves 5k * 6% interest compounding monthly = $1300 saving in interest after 4 years.
5k saves $1385 at 6% interest compounding daily after 4 years or $3116 after 8 years compounding daily
This doesn't take into account, that each daily saving in interest means you are paying off a little bit more of the principal with each repayment you make. Resulting in a reduced loan term and saving you interest over the whole term of the loan.Hope this helps with realising what might be happening with your loan. You may need to ask them if this is what is happening.
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