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 Grant Me Wings

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

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


Get your FREE Baby & Toddler Ticket!

Get your free ticket to the Essential Baby & Toddler Show Brisbane (4-6 March). Register online now to save $20!

Newborn baby found in a nativity scene

Police are trying to trace a woman who abandoned a baby boy in the manger of a church nativity scene.

Life would be harder without my kids

The Humans of New York Facebook page is well known for sharing touching, real stories from one of the world's biggest cities – and it's just hit the heart of parents everywhere.

Mum dresses as Wonder Woman for last day of chemo

A Brisbane mum dressed up as a superhero to celebrate the end of her chemotherapy and created a moment her family will remember forever.

How a raisin can predict a toddler's IQ

All you need to assess a child's future intelligence is a plastic cup and a raisin, according to new research.

Former Hi-5 member's cannabis hope

Former Hi-5 star Tim Harding hopes a cannabis-derived drug will help control his daughter's epilepsy, which sees the four-year-old suffering between 50 and 100 seizures a day.

The top 5 reasons your toddler throws a tantrum

Whilst to the outside world little people may appear to have it easy, it's actually not always the case – just ask any toddler who's had their toast cut up the wrong way.

Glenn McGrath thought he'd lost his wife and baby

Australian cricket ledged Glen McGrath has spoken about the moment he thought he might lose his wife, Sara and their baby daughter, Madison.


Inside my Centrelink nightmare

Mother Bec Smith has been trying for months to access Centrelink payments. A "serious error" is preventing her.

Warnings over push for hourly childcare billing

Australia's peak childcare body has called for caution around the Turnbull government's push for childcare centres to charge parents by the hour, not by the day.

Cate Blanchett thought about adopting for years

Cate Blanchett says her recent adoption of a baby girl had nothing to do with wanting a daughter after having three sons.

Kate Walsh: 'I can't have kids'

Grey's Anatomy star Kate Walsh has revealed she is unable to have children because she has experienced early menopause.

The parasite that could boost fertility

The Tsimane women of Bolivia are often revered as among the most fertile in the world - on average having 10 children in their lifetimes -- but some are even more fertile than others.

Family may sue cousin over genetics

A Melbourne couple is suing the Royal Children's Hospital for failing to diagnose a genetic disorder in their first child - an error they allege caused them to have another child with severe disabilities.

Strange things mums have done in labour

While most women in labour focus on the upcoming birth of their baby, some women do more interesting things.

Michael Clarke reveals baby's name

When Michael Clarke said he was wrapped around the finger of his little princess, he wasn't joking.

The logistics of breastfeeding twins

Our life is more or less divided into neat four hour parcels of time and it's hard to get much of anything done in the time between feeds.

How to stop people ruining Christmas

We can make a conscious effort about how we react to those curly Christmas day scenarios that can send us up the wall, or should we say chimney.

Lots of formula offers for desperate mum

The mum who was down to her last three tins of baby formula said she had received hundreds of calls and offers to send her formula.

Surviving breast cancer while pregnant

It was last thing Rebecca O'Donnell expected at 30 weeks' pregnant. One morning, while putting on her bra, she felt a pea-sized lump in her right breast.

Cot sheet brands for the nursery

With so many awesome cot sheet options these days, we thought we'd put together a list of go-to brands for you to seek out for your baby's bed.


What's hot on EB

How I survived breast cancer while pregnant

It was last thing Rebecca O'Donnell expected at 30 weeks' pregnant. One morning, while putting on her bra, she felt a pea-sized lump in her right breast.

Grieving father's letter to Bataclan terrorists: "...this little boy will threaten you by being happy and free"

A grieving father whose wife was killed in the attacks on the Bataclan Theatre last weekend has written an open letter to her killers.

5 challenges of motherhood - and how to see them differently

Despite the smiles, the sloppy kisses and the pure magic children bring to our lives, it's hard to deny that motherhood can be tough.

4 challenges of being a new dad - and how to face them

Becoming a parent is challenging – and that applies to both mums and dads.

My battle against antenatal and postnatal depression

I was five months pregnant when I realised I needed help.

Children swapped at birth will not be returned to biological parents

A boy and girl accidentally swapped on the day they were born will stay with the families who have raised them, a South African court has ruled.

A quarter of men believe they get 'man periods'

A British study has revealed one in four men believe they have a monthly cycle.

Baby deposit

How much do you need to save for a 'baby deposit'?

It's fairly straightforward to calculate a house deposit, but how much money do you need to save up for a baby?

Dad's beautiful note to his wife, a nurse

To anyone else it might just look like a picture of a mum having a nap with her toddler.

'I was a complete schmuck': Mike Baird opens up about his wife's postnatal depression

When his wife Kerryn was not well following the birth of their daughter, NSW Premier Mike Baird buried himself in his work.

Mum's desperate plea as whooping cough alert issued

A desperate mother has shared a heart-breaking video of her baby struggling to cope with a coughing fit caused by pertussis.

Coffee could help you live longer

New US research found people who report drinking three to five cups of coffee a day are less likely to die prematurely from heart disease, suicide, diabetes or Parkinson's disease.

The joy and dread of playdates

To live vicariously through your child is to rediscover anxieties you thought dead and buried.

Sick baby could die without scarce special formula, mum says

Lizzie Cann is down to her last three tins of a special formula in short supply.

Adorable toddler's strop foiled by squeaky shoes

We're probably all familiar with the pouty bottom lip and tightly crossed arms of a tot mid-strop.

More sex during World Cup created more baby boys

More sex during South Africa's World Cup meant a disproportionately high number of boys were born nine months later, a new study has found.

ABC Shop perfect for Christmas gifts

What a boon it would be to have your toddler's Christmas gifts covered this year. We have two awesome ABC Shop prize packs to give away to two lucky winners.

Do fitness challenges really work?

Fitness challenges aren't new. There's Michelle Bridges 12WBT and a bunch of other programs if you really want to lose weight.

What are pregnant women Googling?

Pregnancy is a huge change for any woman, so it's natural we'll have questions - and turn to Google to ask them.



Can't decide?

Check out the Essential Baby Names section for some inspiration

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.