Non-ADI lenders - Money in offset - will/should we refinance?

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  Nugs on 20/03/2020 - 10:01

  Shift it

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  donbot on 20/03/2020 - 10:34

  I'm thinking to shift my offset balance away from my mortgage. Interest differential is a consideration - but in my mind, its a cost of knowing its protected as I'm sure buried in the loan documentation, they reserve the right to net off any funds held in an offset against the loan.

  It doesnt change the repayments (just the interest that attributes), but in a less than ideal situation, you end up with less than ideal solutions.

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    serpserpserp on 20/03/2020 - 11:28

    I'm sure buried in the loan documentation, they reserve the right to net off any funds held in an offset against the loan.

    Yes that is if they are calling in the loan against you. Not if they are going out of business.

    Again I've explained this in countless other threads on these tiny lenders, it is very unlikely that if they go under, you are going to be very impacted from an operational perspective of the loan. Whoever picks up their loan assets are going to want you to make your repayments and have your offset account as per usual.

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      donbot on 20/03/2020 - 11:44

      I'm talking more of a seperation of the rainy day fund (current offset balance). If its offset against the loan by current lender/whoever picks up the loan, then I'm stuffed in terms of a rainy day fund.

      If my offset balance is held with a seperate bank, no-one can offset it. and provided I service the loan, they wont care about any offset balance.

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        serpserpserp on 20/03/2020 - 13:55

        I'm talking more of a seperation of the rainy day fund (current offset balance)

        Your true rainy day fund should never be in your working capital mix! :)

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  DingoBilly on 20/03/2020 - 11:24

  I'm waiting to see what the banks announce as part of their rate cuts.

  I have a feeling Loans.com.au won't pass on the full rate cut, at which point I'll jump ship to someone like Athena as they seem to be a lot better around passing on the full cuts, although they're taking their time this time around so maybe not so much.

  But as far as I'm aware - banks have never actually collapsed in Australia, so I don't see why they would at this stage. I'd imagine there are far worse off banks than Loans.com.au as well so I wouldn't personally worry about it going under.

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  Cluster on 20/03/2020 - 13:44

  RAMS effectively collapsed in Australia in 2008 and had to be bought out.

  "Unable to fund itself, RAMS became the first Australian corporate victim to the financial crisis. Other non-bank mortgage lenders also came under pressure as global securitisation markets effectively shut down."
  https://www.stubbornmule.net/2008/10/australia-and-the-gfc/

  The only people who lost out were the new shareholders after RAMS was floated on the stock market right before the collapse. Ouch.

  I'm looking at Athena to refinance and am not sure if they're strong enough to survive this crisis. Nothing against Athena, but if you're making mortgage backed securities and selling them on short term markets so you can lend money to people for 30 years, if the market freezes up or customers lose faith in the securities because house prices have started to fall, the lender is in trouble. Higher costs would have to be passed onto borrowers.

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  miwahni on 22/03/2020 - 02:09

  Not sure if this gives you any comfort, but LCA's parent company Firstmac made it through the GFC without any handouts. If you're that worried, can you shift your funds from your offset account into the loan itself, and then redraw what you need when you need it?

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    CheapskateQueen on 22/03/2020 - 09:25

    I do think it's unlikely but who the f knows what the next 6 months will look like.

    Don't want to put the money into the loan because even though it's my home now, I know I won't want to live here for forever. Either I'll sell or it'll become my investment property, in which case it'll screw me tax wise.

    I think I'm going to move my cash or refinance just to have peace of mind.