Help with Understanding Home Loan Redraw Balance and Loan Balance

• 

  adam on 29/03/2023 - 00:32

  +8

  I copied your post into ChatGPT and it said the following:

  It sounds like you are confused about how the available redraw funds in your variable loan account work, and why they do not equal the loan balance.

  When you make extra repayments on your loan, those funds are credited to your loan account and reduce the outstanding balance. However, if your loan has a redraw facility, those extra funds are not automatically applied to paying off the loan balance. Instead, they are held in a separate account within the loan, called the redraw facility, and can be accessed by you to withdraw or use as needed.

  So, in your case, it seems that you have made extra repayments that have been credited to your loan account and have reduced the outstanding loan balance to $12,182.39. However, because you have a redraw facility, the extra funds you have paid above and beyond the loan balance are held in the redraw facility and are available for you to access if you need them.

  In other words, the available redraw funds of $12,365.14 represent the total amount of extra repayments you have made that are above and beyond the current loan balance. While these funds are available to you, they have not been applied to paying off the loan balance, and you will still need to make repayments to pay off the outstanding balance of $12,182.39.

  If you want to fully pay off the variable part of the loan, you will need to use some or all of the available redraw funds to do so. Alternatively, you can continue making regular repayments until the loan balance is paid off, while leaving the available redraw funds in the redraw facility for future use if needed.

  I hope that helps clarify the situation for you!

  • 

    dudebargain on 29/03/2023 - 00:44

    According to the bank if I redraw the full redraw balance which is $12,365 to pay of the loan, it will increase my loan balance by 12,365 and make it $24,547 which is derived by adding $12,547 and $12,182. So redrawing the full redraw balance to pay of the loan will result in my loan balance increasing.

    I just don't get why the extra repayments I made cannot be used to pay off the loan balance.

    • 

      jjjaar on 29/03/2023 - 00:48

      The extra loan repayments are being used. You only owe $12k now, not $24k.

      If you never made those payments, you’d still owe $24k (plus a bit more as you likely reduced interest by having the $12k in there).

      • 

        dudebargain on 29/03/2023 - 00:56

        I do not get how I would owe $24K? The variable loan balance was never $24K at any point in time.

        • 

          jjjaar on 29/03/2023 - 01:05

          @dudebargain: See my edit below

        • 

          AngoraFish on 29/03/2023 - 01:07

          @dudebargain: You're just being obtuse. If you withdraw from your loan balance you increase the size of your loan. If you take $12,365 in cash out from your loan your loan is suddenly $12,365 larger.

        • 

          Settero on 29/03/2023 - 02:10

          @dudebargain: Yes you did.

          Redraw balance is banks money not yours, you are just able to borrow it again as you are ahead in your payments.

          • 

            MortgageBrokerDylan on 31/03/2023 - 08:54

            @Settero: +1

        • 

          shiftyphil on 29/03/2023 - 06:44

          @dudebargain: Loan balance: $12,182.39
          Redraw avail: $12,365.14
          If you had made no extra payments, the loan balance would be $24,547.53

          When you last split the loan - "When the variable amount reached $61,480.65, I further split it by fixing $45,000. Which left the variable balance at $16,480.65"- how much was the redraw balance then?

          The redraw always stays with the variable part, since fixed loans generally don't allow redraw.

          • 

            dudebargain on 29/03/2023 - 13:33

            @shiftyphil:

            When you last split the loan - "When the variable amount reached $61,480.65, I further split it by fixing $45,000. Which left the variable balance at $16,480.65"- how much was the redraw balance then?

            It was around 8K.

  • 

    Mulga Bill on 29/03/2023 - 11:53

    "If you want to fully pay off the variable part of the loan, you will need to use some or all of the available redraw funds to do so."…this is not correct…the redraw amount has already been used to reduce the loan balance from 24k to 12k

• 

  jjjaar on 29/03/2023 - 00:36

  This could be two things, and it’s hard to determine from your post alone.

  1) The bank means because you have money in the redraw facility, you haven’t actually paid off your loan, and even though the redraw is sitting there, you still owe them that amount. If this is the case, you need to direct them to take your redraw and close the loan.

  Or:

  2) You’re incorrectly interpreting the way they’re presenting the numbers.

  It’s shown as -$12,182.39, because it’s an amount owed, hence the negative.

  If you redrew your total $12,365.14, the account would now show -$24,547.53. The redraw amount you have in there has already lowered the amount.

  Do you have other accounts with this bank that aren’t the mortgage? If so, how do they show up? If not, and you had an account with $50, it would show as $50, not -$50.

  • 

    dudebargain on 29/03/2023 - 00:52

    According to the bank if I redraw the full redraw balance which is $12,365 to pay of the loan, it will increase my loan balance by 12,365 and make it $24,547 which is derived by adding $12,547 and $12,182. So redrawing the full redraw balance to pay of the loan will result in my loan balance increasing.

    So I cannot direct them to redraw the and close the loan.

    I just don't get why the extra repayments I made cannot be used to pay off the loan balance?

    I have an offset account which is just a regular transaction account.The amount there shows as balance $10,000 and available $10,000.
    The fixed account shows as balance $-400,000 and available $0.
    While the variable account shows as balance -$12,182.39 and available $12,365.14.

    • 

      jjjaar on 29/03/2023 - 01:01

      +1

      It’s misleading, but the balance (-$12,182.39) shows the total amount you owe (-$24,547.53), less any extra payments you have put in ($12,365.14).

      You are also confusing the “redraw facility” and the action of “redrawing funds”.

      The redraw account is the facility where extra payments are stored. The action of redrawing is to take that money you have paid extra, and keep it for yourself (buy a car, pay for a holiday, etc.) Basically to remove it from the equation.

      To put this money toward the loan, you need to put that amount extra you have paid INTO the loan, completely removing your ability to access it.

      If you were to do this, your account would show balance -$12,182.39 and available $0.

      Edit: I have just read your comment above where you say the variable was never $24k. What was the original amount owing? If this is the case, I would be going back through all your records from the day the loan began. I would also assume that the person from the bank has interpreted it the same way I have, so it may just be a generic explanation rather than someone who has looked properly, though I would hope they’d have seen your records to be able to provide more accurate responses. FWIW, my bank displays it as I have described above.

      • 

        AngoraFish on 29/03/2023 - 01:10

        It's usually because the loan has been refinanced, and any residual left over after the fixed mortgage portion of the loan is covered is paid off as redraw against the variable portion of the loan.

        • 

          jjjaar on 29/03/2023 - 01:14

          @AngoraFish: I was going to ask if this was a new loan or as a result of refinancing. There’s a lot of ways for money to appear to be missing when refinancing, if numbers aren’t looked at meticulously.

          It may be that OP assumed the variable was only $12k because of previous repayments making it look balanced, but was actually $24k owing, with it being reduced by the $12k in the redraw.

          • 

            AngoraFish on 29/03/2023 - 01:18

            @jjjaar: It's not 'missing' though. It's just that he would have applied for, say, a variable of $50,000 and a fixed of $500,000, and after refinancing only ends up needing a loan of $537,634.86, with the remaining $12,365.14 applied against the variable portion of the loan as redraw. But yes, unlikely, but he could also have been making extra monthly repayments.

            • 

              jjjaar on 29/03/2023 - 01:20

              +1

              @AngoraFish: Hence why I said “appear to be missing”.

              I’m understanding it the same way you are.

      • 

        dudebargain on 29/03/2023 - 01:36

        Here is a a bit more detail about the loan. It is not a new loan. The original loan when the house was purchased was variable 600K and I have been making extra repayments into it. When the variable balance was $587,731.63, I split it. Fixed $518,981.00 and left $68,750.63 in the variable. Continued making extra repayments into the variable.

        When the variable amount reached $61,480.65, I further split it by fixing $45,000. Which left the variable balance at $16,480.65. Continued making extra repayments into the variable. As of today the variable account shows balance as -$12,182.39 and available $12,365.14.

        So since the loan was started when the house was purchased, I have been making extra repayments which amounts to $12,365.14 in redraw as of today.

        Does this help explain what the bank is saying in regards to the variable loan balance currently?

        • 

          jjjaar on 29/03/2023 - 01:52

          +6

          @dudebargain: You are confusing the amount owed and the balance. They are not the same thing.

          The balance is the total amount owed less redraw.

          It is basically saying… you borrowed (amount owed) $10 from me but you’re asking me to store (redraw) $2 in my money box, and the difference is (balance) $8. (Or the simple equation: -10 + 2 = -8)

          But! Because you can take the $2 out when you want, you still actually owe me $10 (because I can’t really do anything with it as you might want it at any point). That is, until you give me the $2, with no option to take it out. That’s when the $2 is officially mine, and that’s when you only owe me $8. (The updated equation: -8 + 0 = -8)

          Which left the variable balance at $16,480.65

          This would have been less any amount you had in the redraw, not the total amount owing on the variable portion of the loan.

          Based on the other information you have provided, when you made this last split, you would have had at least ~$8k in your redraw, meaning you had at least ~$24k owing on the variable portion at that point in time (note: numbers could be much higher depending on when this split occurred).

          But you only took note of the balance ($16,480.65) and wrongly assumed this was the amount owed.

          • 

            dudebargain on 29/03/2023 - 12:18

            @jjjaar: I get what you are saying.

            You are right about the redraw being around 8k when the last split was made.

            I guess my confusion is coming from the fact that no where in my loan details I can see the amount owed on the variable portion. I can only see the balance and available redraw funds.

            Looking at the transaction around the time the last split happened, there is no reference of 24K owing in the variable portion.

            So the amount owed is something I have to calculate myself and it will not be mentioned directly anywhere in my variable loan?

        • 

          AngoraFish on 29/03/2023 - 02:14

          +5

          @dudebargain: jjjaar has been far more patient with you than I would have been. You either want someone to explain to you where you have stuffed up in your assumptions, or you're looking to have someone validate your preexisting view that the bank has done you over in some indeterminate way

          If you're looking for someone to make you feel as if you've been taken advantage of in some way then this is not the forum for you.. If you want to learn, however, read the responses you have already received again, think about them a bit, then move on with your life.

          • 

            jjjaar on 29/03/2023 - 02:15

            +5

            @AngoraFish:

            jjjaar has been far more patient with you than I would have been.

            I blame the insomnia 🫠

            • 

              original15 on 29/03/2023 - 08:59

              @jjjaar: Sound advice and guidance jjjaar

          • 

            dudebargain on 29/03/2023 - 12:21

            @AngoraFish: I am just looking understand where I stuffed up my assumptions.

• 

  GG57 on 29/03/2023 - 09:33

  How many recent forum posts where people don't understand mortgage redraw amounts or offset account?

  • 

    MS Paint on 29/03/2023 - 09:43

    +2

    14

  • 

    jjjaar on 29/03/2023 - 11:15

    +1

    Too many. Proof that some people shouldn’t be taking on loans just because they can.

    Though I do excuse those who are posting to clarify redraw/offset before getting the loans. At least they’re trying to figure it out before signing.

• 

  Darayus on 29/03/2023 - 09:51

  +2

  I wish you had taken a little more interest in maths class in your school days. Then this question would have not arised.

  • 

    timthetoolman on 29/03/2023 - 16:44

    +5

    I wish you had taken more a little more interest in English class in your school days. Then this statement would not have arisen

    I'm sorry, it was right there

    • 

      original15 on 29/03/2023 - 22:59

      +1

      Bruh. “Taken more a little more interest”

      • 

        timthetoolman on 29/03/2023 - 23:35

        +1

        Yeaahhh I know, what a terrible time for a typo!

• 

  Mulga Bill on 29/03/2023 - 11:39

  +1

  I work for a bank - Think of it like a credit card - your loan limit is $24,547 but you owe 12,182.39…you cant just do cash out on a CC to pay off that same CC…with a P&I loan the limit will reduce each month till it reaches $0 at the end of your loan term.

• 

  Mulga Bill on 29/03/2023 - 11:50

  +1

  check your loan documents when you split and the variable balance was $16,480.65…the documents should show the variable loan limit is higher than that. eg lets assume you has same redraw amount then ($12,182.39) the new variable loan limit will be $28,663.04 with balance $16,480.65.

• 

  Filbert on 30/03/2023 - 18:59

  Trying not to confuse this further but 😁 you state you are putting extra payments into the fixed amount. I suspect you are putting these ‘extra payments’ into an offset account. The whole purpose of an offset account is to cancel out any loan interest to the tune of the amount in the offset. You receive no interest or as the ATO sees it, income, on these savings that you would normally be taxed on.
  But you can withdraw it if you want to. You really have nothing to gain by withdrawing and then paying down the loan, the financial impact is the same.
  I would just leave it as it is and you have emergency funds.
  Once your savings are greater than this portion of the loan, then start another offset on the main part. If you can’t, start putting extra into the main loan or whichever us the highest interest.
  Hop this helps.

  • 

    dudebargain on 30/03/2023 - 20:18

    +1

    I have not put any extra payments into my fixed loan. The extra payments always go into the variable loan.

    I do also have an offset acount with some amount of money in it. But the extra repayments always go into the variable amount.