What happens in a (home loan) refinance?

[Deactivated] on 09/03/2016 - 12:18

Howdy

I have read many explanation but just can't seem to find simple examples that I can wrap my head around. Can someone help demystify?

Scenario (numbers rounded for ease):
2014 Purchased $600,000 property with $500,000 loan from Firstmac, interest = 5%
2014-2016 Paid interest only $30,000, plus $80,000 in offset
2016 Westpac inspects property and values it at $700,000, interest = 4.5%

Questions:
1) If say yes to Westpac, do I need to take $80,000 out of Firstmac into another non-associated account and then later deposit into Westpac or are they able to do this for me? I would like to have $80,000 sitting in offset and accessible as knock on wood fund.

2) Supposedly per above I do take out $80,000, what does Westpac do at this point, do they pay out $500,000 to Firstmac to finalise initial loan?

3) Now this part really confuses me. Does Westpac now give me a new loan of $700,000 with $100,000 already paid off (my original 20% deposit) and another $100,000 cheque to do whatever I want? If I deposit that cheque into offset I'll end up with the same $500,000 loan I had in 2014 starting with a brand new 30yr term, yes? But every dollar I dip into of the $100,000 would mean I will have a higher monthly repayment, yes?

4) Anything else obvious I've missed or anything else I should know? Westpac offers offset, and currently $1200 cash-back for refinance. I currently have debt & credit card with them so everything in single place should be convenient.

Thanks heaps! :)

P.s. Using moolar for IP, not paying off CC / going on holiday so words of caution are safely not necessary.

Financial

Comments

  • humdingaling on 09/03/2016 - 12:47
    +1

    are you refinancing to get more capital for some reason? or just moving to supposedly better/more competitive rates?
    remember you need to associated all the costs with switching loans into your calculations

    if you choose to refinance for the new value of the house (they would most likely give you 80% of property value…so you really only could extend 60k) you will be given the money for the difference between what you had owning left with firstmac and your new loan amount

    your term will be reset to whatever you choose with westpac (25 or 30) and repayments are recalculated
    after which your offset will only effect the ratio of how much your repayment goes into interest and how much goes into principal

    unless of course you are choosing interest only

  • samprofs on 09/03/2016 - 16:10
    +1

    It would depend how your Westpac banker or your broker structures the deal.

    Usually Westpac would pay out your LOAN ACCOUNT (in this scenario $500,000) dollar for dollar and deposit any excess funds into your nominated account (your new westpac offset or your old FirstMac offset). This would also be nominated in the disbursement authority form once your Westpac Loan is approved.That is how i usually structure it for my clients and that way they can simply transfer their old offset funds into new off-set and can clearly see how much was debited by old lender for discharge fees.

    I suggest you also have a look at Bank of Melbourne/St George/Bank of SA .They are doing some very competitive pricing on their Advantage Pack and also allow to split the loan together with a 4.04% 3 year fixed rate. St George group is owned by Westpac and have an identical lending policy, but with more competitive pricing. You will also be eligible for a $1500 cash re-finance rebate.

    Hope that helps.

Login or Join to leave a comment
Login Join