I have a question regarding Interest Only home loan and repayments.
I am almost finishing paying off my mortgage balance $2k.
I have $150k available via redraw and would like to have access to this for a couple of years until i build up my savings..
The question I have is if I switch it IO is interest charged on the 2k balance or 152k balance?
Thx
Hi woodg
That what I thought although the lender advised the following
'the repayment amount is calculated based on your balance + the funds held in redraw as you still have access to the funds'
That's the repayment amount. That is different to interest.
I'm a bit confused, this is not my area.
I thought with an Interest Only loan I would pay interest on the the balance owing only.
In this instance I expected the interest Only to be charged on the $2k balance and no further repayments of the loan required.
What am I missing?
@Numpty21: When you redraw, for whatever reason, the repayment amount may change.
Let's say you redraw $40k out for renovations, a holiday or a new car.
Then the mortgage repayments may increase again.
If you are only owing $2k balance, you should be able to reduce your repayments to the minimum. It might be $10 a month or whatever, over a 30 year loan. They re-calculate it.
The interest only period you request is up to the bank. Just ask them.
usually they don't allow interest only periods unless you experience hardship in repaying but speak to your lender. They might not allow you to make extra payments during that period either.
@cupcake: Thanks you your response…
They have approved an interest only loan for a period of 3 years.
But my repayment has been set @ $250/mth
I though my repayments would be in the order of $10 for the 3 years while paying interest only.
I have asked the lender but again said
'your current loan amount is $152k which is what the repayment amount is calculated from. this is your current loan balance + the funds you have held in redraw which you can access anytime'
Which doesn't soud right for me with an Interest Only Loan
@Numpty21: I would forget about locking it into an interest only term. It doesn't sound right.
Just make your monthly mortgage repayment and keep redrawing.
I've reduced my repayment amount just so that I don't pay it off - as I still want access to redraws if I need it.
Can you just change/reduce the weekly/fortnighly/monthly repayment amount to the minimum?
Seeing as the amount owing is so little, I would just reduce payments.
Easy to do in your home loan account settings. Just don't pay it all off.
Yeah i looked at that but minimum repayment was $500 and loan would have been paid off in 4 - 5 months.
You have a redraw facility, so just redraw from the home loan…
Your minimum repayment should be less if only owing $2k.
Pull out $500 every month from the redraw.
The easiest way to do it is put all the money into home loan assuming it’s a variable rate loan. And cancel the repayments. You will not have access to all the funds paid in advance because redraw amount will keep reducing slowly.
Please note that it is not financial advice, so best to call your bank and make sure it will work.
do you have an offset account? withdraw the 150K in redraw and put into offset account
whenever you want to pay off the load down the track, use all the money in the offset account to pay it off.
money in redraw facility is not guaranteed, it is banks money, banks can stop redraw in tight liquidity suitation but rarely
money in offset is your money and can access any time
Interest is on the $2k only. You will still have to make repayments until the $2k is paid off. When that final $2k is paid your load will, generally, stay active, but check with your bank as to its rules.