Jump to content

Reducing home loan limit
Do people do this?


  • Please log in to reply
18 replies to this topic

#1 Ally'smum

Posted 31 January 2013 - 12:19 PM

I have a home loan with Westpac and we have some extra money in the loan as well as money in an offset account. I am worried about our ability to save, we seem to always be dipping into the offset, so I was wondering if I could pay extra money into the loan, then reduce the loan limit so it wouldn't be sitting there for us to access.

Does anyone else do this? How often can you do it? What is a reasonable amount?

If I reduced the home loan by $1000 each month, then called the bank to reduce the limit, would they get annoyed?

#2 JustOneMorePlease

Posted 31 January 2013 - 12:46 PM

Someone will correct me if I'm wrong but I'm pretty sure you can't change your home loan limit.

#3 MrsLexiK

Posted 31 January 2013 - 12:46 PM

sorry OP just wanting to clarify - are you talking about paying x amount off and then refinancing your loan (so say you have paid $70K off a $200K mortgage including all your monthly repayments you then get a loan for $130K thus reducing your repayment amount)

or are you asking whether you put say $10K into the loan in advance and reduce your mortgage repayment each month by $1000 until the $10K in advance is no longer in advance? (so your monthly payment is made up of $1000K from the advance figure and $300 from your own money)

#4 Acidulous Osprey

Posted 31 January 2013 - 12:50 PM

Without a whole new mortgage and the costs associated with that I don't think you can.  Mortgages are calculated across the life of the loan, they don't work like credit cards.

#5 Ally'smum

Posted 31 January 2013 - 12:53 PM

I meant that if we owe $350k and I pay $10000 into the loan, then call the bank and reduce the loan to $340k.

That way the money isn't sitting there to be redrawn (and our monthly repayments could be reduced to reflect the new amount outstanding over the term of the loan).

Not refinancing as such, just as you can call them and ask to 'top-up' or increase the limit, I was wondering if you could decrease the limit.

Trying to get our debts down...

#6 laridae

Posted 31 January 2013 - 12:54 PM

I put extra on my loan & just don't redraw it.  So its still available in case of emergency - but not as accessible as the offset.

I think you can call them & get them to re-calculate the repayment based on what you paid off already.  I know they recalc the repayment when I redraw (which I've done once for a specific purpose), and they can do it if interest rates drop if you ask (which I've also done - as it was up around 8.5% when I first got the loan).

You can still redraw though - it doesn't affect the actual value of the loan, they just put repayments up again if you do redraw.

Edited by laridae, 31 January 2013 - 12:58 PM.


#7 Bluenomi

Posted 31 January 2013 - 12:56 PM

Coudn't you just get rid of the redraw facility? That would be much easier.

#8 EmAyEm

Posted 31 January 2013 - 12:56 PM

Yep, just get rid of the redraw/offset.

#9 Diana Moon Glamper

Posted 31 January 2013 - 12:57 PM

I suspect that an offset account may not be the best option for you.

An offset account is fine to draw from (not really redrawing), that is the purpose, put as much money in there to reduce the interest you are paying day-to-day. It's why they are often  used in conjuction with credit cards.

If you want to actually pay additional into your loan you can request the bank capitalise the payments which will reduce your required repayments, but not the loan amount as such.

I would suggest talking to the bank and seeing what they suggest, you are probably paying fees for the offset while not using it to the best advantage.

#10 Therese

Posted 31 January 2013 - 12:58 PM

I would just get rid of the redraw option.

#11 MarsBarSlice

Posted 31 January 2013 - 12:59 PM

Why don't you get a loan that doesn't have a redraw facility and that way you can put extra on the loan and it stays there and you can't touch it.  You can't change the principal amount of the loan unless you refinance for a different amount.

#12 Ally'smum

Posted 31 January 2013 - 01:04 PM

Yes getting rid of the redraw would be the solution, thanks EB! original.gif

#13 MrsLexiK

Posted 31 January 2013 - 01:06 PM

QUOTE (loggedin @ 31/01/2013, 01:53 PM) <{POST_SNAPBACK}>
I meant that if we owe $350k and I pay $10000 into the loan, then call the bank and reduce the loan to $340k.

That way the money isn't sitting there to be redrawn (and our monthly repayments could be reduced to reflect the new amount outstanding over the term of the loan).

Not refinancing as such, just as you can call them and ask to 'top-up' or increase the limit, I was wondering if you could decrease the limit.

Trying to get our debts down...


Even when you increase the loan you refinance though (unless you have money sitting there in advance and you use less then that amount.)  I would perhaps look at a loan without the offset, but with a redraw which you need a minimum to redraw.  Mine is $2K in advance to redraw, so we would only dip into it if we really really had to (unlike when I dip into our savings because $50 here or there doesn't seem like much) You will also get a lower interest rate but if you keep up your monthly repayment by what you are paying now you will pay it off quicker.

#14 justnotfeelingit

Posted 31 January 2013 - 01:10 PM

You can do that (pay say the $10k to reduce from your $350 to $340k), its called a capital reduction - I'm guessing not all banks will do it, ours did (Heritage) - we've done it a couple of times actually.

Worth a call to the bank.

ETA that you may need to have those funds already 'in advance'.

Edited by itsmemacdolby, 31 January 2013 - 01:12 PM.


#15 ~*MissPriss*~

Posted 31 January 2013 - 06:16 PM

Westpac will do this, and your repayments will just be re calculated based on the new loan limit. I don't believe there are any fees to do this.

#16 Babetty

Posted 31 January 2013 - 06:31 PM

We have done a 'capital reduction' too - put in a lump sum and they reduced the loan and recalculated the repayments. This was with St George. It was not a refinance.

Go and talk to your bank and discuss options - whether removing the redraw facility or doing a capital reduction is right for you. If you're only doing $1000 at a time, they probably wouldn't want to do a capital reduction every month. I think we paid a $100 fee for it too. Our capital reduction was something like $120 000 (sold our previous house) so it was very much a one-off thing.

#17 Juki

Posted 31 January 2013 - 06:40 PM

Hi op, you can reduce the limit, just call 132558.


Just check when you are on the phone that there is no penalty for paying down the limit (some loans have a fee for payments over $15k).


I personally wouldn't get rid of your offset account as there is no cost to have this account, even if you have  a few dollars in the account, it can save on some interest. If you do choose to reduce the limit, keep in mind that redraw is a handy thing to have in case of a rainy day even if it is only a few hundred dollars.


Furthermore, keep in mind that if in the future you would like to access the equity in your house, if you need to increase your limit it will likely be subject to new application and revaluing your house. This doesn't normally happen immediately.


Other tips I can think of is don't have card access to the offset account, you can change your card access at the branch. If you have any questions aand don't want to talk about it all on the phone, make an appointment at your nearest branch and hey can help you through it.

Edited by Juki, 31 January 2013 - 06:41 PM.


#18 Kitty Fantastico

Posted 31 January 2013 - 06:47 PM

I'm not sure about westpac, but we did that with our home loan provider Ubank. We put in an extra 30k and had them recalculate the loan which resulted in a lower weekly repayment. It's still technically there for us to redraw, but not without contacting the bank first - so there's no temptation to spend it.

There was no fee for this service.

If you want to put extra away, I'm not sure if they'd do it regulary for small payments, but if you have the discipline, you could save 5k and get them to recalculate the loan from time to time.



#19 newphase

Posted 31 January 2013 - 09:21 PM

QUOTE
Yes getting rid of the redraw would be the solution, thanks EB
BUT you can reinstate it at anytime also, so unless you get a product without redraw as an option, or a minimum redraw amount of a few$$k to stop willy, nilly redraw then it isn't really worth it, but having to reinstate it would take time which may stop impulse redrawing!





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

What you need to know about ovulation tests

Most people who are trying to get pregnant know that the best time to conceive is in the few days after ovulation.

Surviving a miscarriage at sea

A cruise with your family is among the most absurd settings for a miscarriage, but it is certainly not the worst.

Mum of three denied tubal ligation because she's 'too young'

A 22-year-old woman who is pregnant with her third child has had her requests for a tubal ligation denied because doctors believe she is too young.

Slapped cheek syndrome a danger for pregnant women

When a pregnant woman is infected, the likelihood that her foetus will be infected is about 50 per cent.

The signs and symptoms of ovulation

If you're hoping to conceive, one of the most important things you need to know about is ovulation.

We all know 'mum guilt' - but what about 'dad guilt'?

I remember the first time I felt mum guilt, within days of having my first child. The feeling was so intense I rang my own mum to debrief, hoping she'd tell me I wouldn't feel this way very often.

Kristen Bell urges mums to be their own superhero

When it comes to motherhood, actress Kristen Bell is her own superhero and she thinks other mums should be too.

Pram review: GB Pockit travel stroller

In a world of ever-shrinking gadgets, it's no surprise prams are getting smaller. We put the record-holding GB Pockit through its paces.

The beautiful Bombol Bouncer is back

The gorgeous Bombol Bouncer is back - and boasts two chic new colours to boot.

Gadgets and accessories for wine lovers

Looking for a gift for the wine lover in your life - or just something for yourself?

Free ticket offer

Pinky Mckay joins us again at the Essential Baby & Toddler Show presented by Blackmores with her expert baby settling advice. Register now for your free ticket.

The adventure doesn't have to stop: here's how to travel with baby

The best part about our outdoor adventures? It makes my husband and I better parents, since we're happier while adventuring.

Woman crashes car to save mum and baby's life

A good samaritan saved a mother and baby from being seriously injured by crashing her own car into theirs.

Should you tell your boss about your postnatal depression?

Returning to work after having a baby can be daunting, and when you're experiencing postnatal depression or anxiety it can seem even more overwhelming.

TV noise can slow toddler word learning, study finds

Background noise from the radio or TV might be making it harder for your toddler to learn learn new words.

Teresa Palmer on her molar pregnancy and 'unsexy' conception

Teresa Palmer is basking in pregnancy glow as she awaits the arrival of her new baby.

 
Advertisement
 

Top 5 Articles

Advertisement
 
 
 

What's hot on EB

For the festival lover in all of us

Pre-book & Save 50%. Get your tickets now for Kidtopia Festival. 7-9 October 2016 Parramatta Park, Sydney.

Why drinking water can be deadly for babies

H2O is one of the necessities of life, but for babies a seemingly harmless amount of water can be fatal.

5 ways having a baby is different when you have older children

So much parenting advice is geared towards having your first baby, but what's it like having a baby when you already have children?

You can now make your own plush Falkor

Fans of The NeverEnding Story – of which there are certainly plenty – went crazy for these plush Falkors when they first went on sale last year.

Baby steps

10 things that will actually happen after having a baby

I thought I had prepared myself for motherhood. Then my baby girl arrived and knocked everything flat.

Having a baby: expectations vs reality

People love to warn you about what to expect when having a baby, but they can be way off when it comes to the reality.

Are we having fun yet? Thinking positively as a parent

Motherhood is wonderful ... except when it sucks.

The adorable smile of a baby seeing his mum clearly for the first time

There is no doubt seeing their child smile for the first time is an unforgettable moment for parents everywhere.

When breastfeeding doesn't go with the flow

Breast is best, except when it's not. And in our case, it most definitely wasn't.

'If you don't vaccinate your kids you're a bloody idiot'

The photos are heartbreaking and almost too difficult to look at, but Kayley Burke is begging other parents to take notice.

Why pregnant women should eat chocolate

In news that will make expectant mums jump for joy - and reach for a block of Cadbury - scientists have revealed chocolate could provide health benefits during pregnancy.

The baby born with an incredible head of hair

If you're in any way challenged in the follicle department, prepare to feel a jolt of envy - at a two-month-old baby.

The push for Medicare to fund lactation consultants

While meeting with a lactation consultant can make an enormous difference to a new mother, it's not a service that is available through the public health system.

Parents, this is how to cut grapes to avoid choking

One mum has learnt a harrowing lesson about the best way to cut grapes to make it safe for toddlers and little kids to eat.

Three truths about C-section mums

Lately I've been thinking about the caesarean stories and the brave women who birth their children with strength and beauty.

Help! My baby will only sleep in my arms

It's stressful to be the one who is holding your baby most of the day, but it's even more stressful to wonder, 'am I doing something wrong? Or am I creating bad habits?'

 

Free ticket offer

Essential Baby & Toddler Show - Sydney

The Essential Baby & Toddler Show, presented by Blackmores, will be held in Sydney on 23-25 September. Register for your free ticket now to save $20!

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.