Hi everyone bought our first home and now refinancing for the first time. How do you transfer the funds from offset into the new loan? My current bank says to transfer into the loan and it will be transferred to the new loan on settlement while the bank I'm refinancing into says I would need to transfer online or via bank cheque into the loan. Anyone has experience with this???
Refinancing Home Loan Funds Transfer
hoyanikon on 29/08/2023 - 13:07
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Currently have money in offset but new bank will be redraw only no offset
So I will be transfering funds from offset to withdraw
Ahhhh kk. Well that sheds some extra light onto the situation.
Well without knowing the terms of the loan / redrew etc, it would be more straightforward (and less risky) to transfer into the new loan AFTER it is set up.
One possible complication that could arise from transferring into the loan BEFORE, would be the new bank considering the reduced amount the new total. Which unintentionally locks you out of ever redrawing those funds again. Assuming you would rather not deal with this headache if it does happen, and wanted redraw in order to access the funds incase of emergency.
Be wary of the redraw terms as well. There might be extra fee's or caps to how much you can redraw at any given time. Another option would be to set up a high interest account to place your offset funds into. It technically wouldn't save as much interest as much as redraw, but with added flexibility.
Ultimately, do what you think works for you,
Another option would be to set up a high interest account to place your offset funds into. It technically wouldn't save as much interest as much as redraw
To add on above, apart from savings interest being typically lower than home loan interest , there is still tax payable on that interest income from savings account.
Currently have money in offset but new bank will be redraw only no offset
Make sure you have decided you won't be keeping your 1st home to rent out as investment property, when you're moving onto 2nd home at latter stage of your life.
Can I refinance again later when I purchase my second home and rent out the first? Refinance to max LVR again with offset for investment purposes
Refinance to max LVR again with offset for investment purposes
It's a zero sum game if the money stays in offset of IP loan as it's already offset interest (not paying interest) thus there is no interest expenses deductible for that offset portion.
If you're taking the money out from offset of IP loan that originates from the refinance, to put into your 2nd home PPOR ;
OR, redraw your current homeloan before refinance it as IP loan and using the redrawn money towards purchase of 2nd home (PPOR),
They're considered as funds for private use (non-tax deductible), rather than redraws/loans with genuine purpose to produce assessable income.https://community.ato.gov.au/s/question/a0J9s0000001E9p/p000…
*PS: Not financial advice. Seek professional assistance for your query.
@dcep: So there is a difference between redraw and offset when PPOR is turned into IP? I.e. it makes a difference if the loan is at 0 balance with redraw, when OP pulls out the money for purchase of new PPOR. Sounds like offset is the way then? Asking for a friend…
Both banks are right, you could do it either way. Pay off the existing loan with the offset and they'll just transfer the loan. Or you can transfer the loan as is and the bank account that currently has the offset will stay there, and you can transfer it into your new loan afterwards.
Does your new loan have an offset and you want to keep that balance or are you just transferring the net amount?
New loan only has redraw no offset. I don't mind to keep balance or transfering the net amount, whichever is easiest and quickest so that my money would continue to offset interest while refinancing
Just wait till the new loan account opens and then transfer it over. You will pay one day interest at the most.
Iirc, on your old loan discharge form, you put down where the excess fund is going to be deposited. This is where you nominate your new loan redraw/offset account.
You really need to understand the implication of not using an offset in your next loan, if you going to turn it into an investment property.
Hold on a sec. Are you intending to:
A. Maintain an offset account with the new bank, Using the funds in the current offset account?
or
B. Reducing down your current home loan, and effectively reducing the amount you have to refinance before switching to the new bank?