Home Loan - Is It Safe to Go with Non-ADI Lender if You Have around 250K in The Offset?

MondaySleeper on 26/08/2019 - 22:56
Last edited 28/08/2019 - 08:18 by 1 other user

Hi Guys

My honneymoon with loans.com.au is over and we are thinking of refinancing. We have around 250K in the offset which we kept for investment and for the rainy season. I was looking at TicToc for refinancing and saw great reviews about it. Also read that the offset from non-ADI is not the proper offset and this could suck in your offset amount if the lender goes bust (this reduces the overall loan liability but you will be out of cash if such a thing happens).

Is it safe to park 200K - 250K in the non-ADI offset? Saw that RAMS went into such a situation and the loan accounts were sold. I googled but couldn't locate info on what was done at that time for RAMS - anyone had his/her offset amount taken into the loan?

Appreciate your advice.

Update: I checked with the tictoc support and they said it's ADI offset amount. They provided the product guide and it's mentioned in that as well. The offset is with Adelaide bank. I had sent an email to Adelaide bank to get confirmation from them as well and waiting for their reply.

It's just that tictoc is very selective to reduce the risk.

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  chumlee on 27/08/2019 - 05:51

  I wouldn't risk my hard earned with a non ADI

  Plenty of ADI's with good rates. Talk to a broker

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  ihbh on 27/08/2019 - 07:49

  My honneymoon with loans.com.au is over

  What happened?

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    MondaySleeper on 27/08/2019 - 08:31

    They increased the rate. And when fixed loan got matured, it was converted to Variable but with .2 higher than the exiting variable I have.

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  Seedy seed on 27/08/2019 - 07:52

  Idk about the last half but im with tictoc. Have been great and the loan is backed by bank of Adelaide, such good customer service.

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    holdenmg on 27/08/2019 - 08:29

    Um, do you mean Bendigo and Adelaide Bank?
    Bank of Adelaide has gone, long ago… 1979?

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      CyberMurning on 27/08/2019 - 09:53

      Yes he meant Thant. Ben and adel

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    MondaySleeper on 27/08/2019 - 08:35

    Heard good reviews about TicToc. The only issue is the safety of the offset amount. I am not a finance savvy so trying understand what would happen should a financial crisis happen all these people go belly up. (Hope it doesn't happen. Not good for country and the community either)

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  mortgagebroker on 27/08/2019 - 08:42

  +1

  TicToc is an Adelaide bank product so is an ADI.

  If you want 100% surety go with an ADI.
  Personal choice, I see no issue personally.

  If your rate has gone up .2 make sure you check how much you will save after all costs as it might not be worth refinancing.

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  serpserpserp on 27/08/2019 - 09:30

  RAMS is owned by Westpac? So it was an ADI?

  I think people don't really understand what happens with a offset for a mortgage. Just being with an ADI doesn't mean that if that lender went belly up, you get to keep your offset money. You need to read the terms of your loan as the bank might have the rights to set-off under any circumstance which could be under an event of default or acceleration by either the borrower or lender.

  I mean the government or acquirer might step in and guarantee that the loans are to stay on foot with the same structure etc. but really you need to consult your loan docs to get a clear picture of what happens. If you are going to sign up with a new lender, ask these questions and get a clear answer before progressing.

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    mortgagebroker on 27/08/2019 - 09:48

    Prior to rams being sold to Westpac in 2007

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      serpserpserp on 27/08/2019 - 09:58

      Not sure what happened on that one, but it was before the GFC. I would assume WBC would have taken on all the loans as is, maybe sold down some delinquent ones. But boilerplate loan docs have changes a lot since over the past 12+ years.

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    HighAndDry on 27/08/2019 - 09:56

    Liquidation or administration doesn't give the bank or non-ADI lender more rights. They can sell the loan to someone else, but they can't force early repayment or set-off.

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      serpserpserp on 27/08/2019 - 10:11

      We don't know what OPs loan docs say but you are probably right, I did say "could" as it is possible to have these types of terms in a contract.

      Looks like it has never been tested in court anyway:

      https://www.smh.com.au/money/planning-and-budgeting/bank-off…

      According to that article you are covered up to 250k on an ADI offset account. But isn't clear over that amount.

      They can sell the loan to someone else, but they can't force early repayment or set-off.

      Well that was if the market was open to buying them. If one of the big 4 went under you'd assume there would be some extreme event in the financial markets. What happens if they can't be sold? The administrator/liquidator probably decides what is better for the creditors in this situation, do they use all avenues to get every cent back now? Or do they let the loans run their course and run the risk of those assets turning to liabilities that will cost a fortune to admin? It would be a really interesting scenario (if it ever happens! My money is they try to sell those loans for anything they can and let someone else deal with the problem, if the markets are frozen the government should step in, but if they didn't…)

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        HighAndDry on 27/08/2019 - 10:19

        Ah yeah - in the case of a non-ADI lender 'offset account', it's tricky because they're not a separate account, just a loan and redraw facility with very low (to nil) requirements. And because it's not an ADI, there's no government guarantee and in the event of the lender going belly up, that redraw facility can disappear. But as for anything that is an ADI or ADI-backed:

        Well that was if the market was open to buying them. If one of the big 4 went under you'd assume there would be some extreme event in the financial markets. What happens if they can't be sold?

        Liquidator or administrator can't realise assets the bank doesn't have. In the case of a mortgage, the bank's rights under the mortgage is all the 'asset' it has. It can't force early repayment if the bank didn't have that right already.

        If no one buys them, you're probably just exempt from repaying the loan until it is bought.

        The administrator/liquidator probably decides what is better for the creditors in this situation, do they use all avenues to get every cent back now? Or do they let the loans run their course and run the risk of those assets turning to liabilities that will cost a fortune to admin?

        If the bank didn't originally have the right to "get every cent back now", neither does the administrator. They can enforce the loans more strictly and not provide any discretionary relief (hardship provisions, etc), but they can't make them immediately payable.

        It would be a really interesting scenario…

        Yes…. but definitely in the sense of the (apparently) Chinese curse of "may you live in interesting times".

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  kipps on 27/08/2019 - 09:55

  It’s safe from insolvency at least by reason of the statutory right of set off which would apply upon insolvency if you owe more than you have in the offset - see section 553C Corporations Act. For that reason I would have no issues with going with non ADI Lender.

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    serpserpserp on 27/08/2019 - 10:14

    So I guess the trick is to have a loan for over 250k and only put in 250k in offset for maximum protection from the Government guarantee?

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      kipps on 27/08/2019 - 10:35

      s.553C is different to the government guarantee on deposits. s.553C applies in any Australian corporate liquidation. It is more correct to say that if you owe the bank more than they owe you (net) then you can only be pursued for your debt net of dealings, however you might experience a short term liquidity issue (because the amount in the offset might not be covered by any government guarantee if non ADI).

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  Trying2SaveABuck on 27/08/2019 - 15:01

  loans.com.au are pretty cheap i cant imagine you will do whole lot better somewhere else

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    CheapskateQueen on 28/08/2019 - 23:24

    I've always recommended loans.com.au but their rates for existing customers aren't as good as for new customers and they won't budge.

    Been with them for 6 years or so and will be refinancing soon for that reason.

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  MondaySleeper on 28/08/2019 - 08:19

  Thanks guys. I have updated the OP description with further info received from tictoc company.