I am looking to refinance my LOC to an IO loan with offset for my mortgage then get a separate LOC strictly for future investments. I am currently with CBA and their offset accounts seems limited to what I actually need so I will need to change lenders to access this. Problem is I have a great relationship with my current lender and I get great discounts on rates, and have all my bank fees waived (inc loan establishments etc). CBA cant give me what I need for an offset account but I know they will be better for me with a LOC and subsequent mortgages on IP's.
What are the issues with using two lenders. Can you have separate mortgages with different lenders on the one property?
Any information regarding this would be much appreciated.
Regards,
Andrew
itsandrew
Go as far as you can see and you will see further.
Generally can't use two lenders if you only have one security.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
CBA must have the worst offset account available.
I agree with you, look to swap lenders for your existing property and set up an IO loan with offset and a separate LOC used just for investment purposes. Then use CBA again if you want to to fund the next investment purchase. In that way you can combine debt finance and debt recycling with the use of the LOC and offset to your benefit.Depending on your personal circumstances, this could be worth far more in after tax dollars than a slightly better interest rate or lower fees. I recently did this for one client setting this same structure up with their existing lender (fortunately not with CBA) and while they had $170k in an offset, we set up a LOC for $123k and using this method above, the benefit to her was $17k pa in after tax dollars by using finance wisely.
While you could possibly get a second mortgage for one property from another lender, it is messy and costly
Good luck.
Greg
Reid ConsultantsThe offset with Cba is not too bad but min withdraw 500. If you use a credit card for your day to day spending and just withdraw once per month from the MISA you have no issues. You also néed a day to day bank account however if you are using the credit card as outlined above you only need to hold a float of a couple of hundred cash; if this 200 is not offset it won’t make much impact.
Just set up a direct debit to your MISA on the same day you get paid.
The benefit is that as you save money in your MISA it’s easier to determine what savings are long term offset versus what is day to day spending.
Using a Westpac rocket or similar causes problems where you have your redraw sitting in you day to day account. If you choose to seperate them and open a 2nd bank account then one does not offset; same as CBA.
In my experience people that offset in their day to day bank account tend to over spend; two seperate accounts is easier to monitor and budget.
I reckon the Westpac Rocket is brilliant for your means. I love the flexibility.
Regards,
Andy
Thanks to everyone for their contributions. It is much appreciated.
Is the CBA's $500 minimum withdraw for their offset account the only limitation compared to a normal transaction account?
Andrew
itsandrew
Go as far as you can see and you will see further.
Someone else mentioned you cannot direct debt from it – not sure if this is correct or not.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Min depoist $500. Min withdraw $500. You can have your salary / rent direct credited to it and just transfer say $500 out each month for cash.
Due to the min withdraw you cant use it for all you day to day bills however if you use a credit card for these you just need one withdrawl p/m to pay your bill. You can also have ATM access however once again limited to $500
Keep in mind the idea is to use it to store your savings; as an alternitive to putting it in your loan/redraw. Most people don’t want $20,000-$50,000 sitting in their day to day account anyway so it helps to have a day to day account in addition to an offset account.
If you hold an average of $500 in your day to day account, you are only missing out on $35 p/a by not having it offset ($500 x 7.0% p/a).
Westpacs annual fee is 395 versus Cba 350 so you’ve got your $35 back even if rates were the same.
Banker
But i can withdraw littler amount so it is a lot more flexible. A lot more flexible. Sorry Banker do you work with CBA?
You could probably just draw out $500 and then redeposit $300 straight away and get around it that way.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I don’t work for CBA however give them 5-10 deals p/m. In andrews first post he says he has a great relationship with his bank, good pricing And expects to use them for other purchases however can’t get an offset. Although the product is slightly inferrior If you adapt your day to day banking the differences become irrelivant.
There is no significant financial benefit for Andrew to change apart from the commission or bonus for the banker / broker that moves him.
Keep in mind most brokers on this site support not paying down debt, rather putting funds in offset. Question is if you have a large sum of funds in offset do you really want that in your day to day bank account?
CBA are by far the most aggressive retail lender and have the most flexable credit assessors out of the major banks.
Why give up a great relationship just to have no min withdraw from your offset?Just want to say thanks again guys! This is really good food for thought as I will be restructuring my loans in the next couple of months.
Andrew
itsandrew
Go as far as you can see and you will see further.
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