Thanks Richard, I am based in Melbourne.
Hi Julito
PIS office in Melbourne is
413/89 – 93 High St
Kew Victoria 3101(03) 9830 1855?Regretfully i cant say i know anyone there.
Richard Taylor | Australia's leading private lender
Hello Marwoto,
On checking interest and interest offset calculations there is some help out there from a group call mortgage watchdog. I have to tell you that I have no idea how good they are, whether you can rely on them, or whether they are a sales funnel for a mortgage broker or lender so be careful if you decide to use them.
However if you are moderately handy with excel, you should be able to check for yourself as you have an interest only loan which should be a no-brainer once you understand how. (although a bit of a pain to do because you need to enter daily balances for the offset and the loan account). Let me know if you have and can use excel and I'll hack out a 'how to' guide.
Your understanding of how a 100% offset facility should work is correct, except for the calculation would be on $260K.
In response to your ADI question, yes, there is a little bit of a risk, but I wouldn't be freaking out and taking it as a reason to run screaming from Ratebusters.
To put it in context, an ADI is and Authorised Deposit-taking Institution as defined and regulated by APRA. They are banks, building societies and credit unions. Regulation by APRA helps protect your deposits and loans. Helps, because in life, nothing is absolutely safe.
Money in ADI's are backed by the Federal Government Savings Guarantee, money in non-ADI's is not. Hence the run some non-ADI investment products in the last year or so which you may have heard about. But what does that all mean to you?
Well, if you have money deposited in a non-ADI, it has more risk and I believe, but am not 100% certain that the offset account is with a non-ADI institution. If this instutution gets into trouble it may swallow your offset balance with no guarantee of refund, but leaving your debt at full value. Worth thinking about if the deposit is $500, worth learning a LOT more about if you have the $100K there.
In the context of your example, even though the $100K reduces the loan balance for the purpose of interest calculations, it does not reduce the debt. So it could be bye-bye $100K and you still shoulder the burden of the $360K debt.
However, rather than running from Ratebusters, you can simply move the money out of the offset, into the loan account itself, which effectively reduces your debt, so if the institution falls over, you only owe the $260K. There are some other bits and bobs to consider, such as the lenders right to freeze funds etc that can be a risk but this post is already a little too long.
In terms of planners, start with Scott's book. He also writes for the Herald Sun (and some others), so if you want to shoot him an email after you've read the book, you can probably reach him via the paper. Read barefoot investor first though, so you can better work out what you need to know.
A final thought.
Be cynical, whether I have written it, Richard has written it, Scott has written it, or whoever. The trouble with writing and reporting for the media is that controversy which scares off advertisers is bad for business, so you may only ever be getting part of the story – and even some of it may be wrong.
You get a freedom in these types of forums that you can't get in mainstream media, but that also comes with a different problem.
Just in this thread, Richard has failed to retract or apologise for falsely declaring something illegal, which he either knows or ought to have known to be false. Richard has also failed to explain to you why he has slandered the Ratebusters product as 'not a true offset facility', however he has been quick to offer you a helping hand. Why?
Several other posters have offered advice to 'get out now'. Why?
You are only just starting to learn and even without a robust plan, you seem to have had some good luck and are doing okay. Be careful Marwoto. Stick to the facts, grow your own knowledge and take your time.
Thanks Richard for your recommendation. I'll keep this contact detail and give them a call when I'm ready.
Thanks a lot to you too Michael, you've been very helpful, surely there are a lot of thing I need to learn. And yes I'm going to start by reading Scott's book.
I don't actually use excel extensively, but I think I can and should be able to figure things out in Microsoft excel.
It is those finance calculation that makeup the formula that I'm not sure of.And actually I am planning to move all my money out of that offset account, make things a bit simpler and safer.
I further query the loan provider, they have additional Mortgage Insurance policy adjustment fee $670 for the top-up on top of that $1300, even thou in the end the total amount of the loan (existing+top-up) is not over 80% of the valuation.
I did pay my LMI when I took the original loan, but my logic says when the loan is less than 80% of the valuation, this is not needed anymore.Can anyone enlighten me on this ? I'm worry that the bank is just making it up.
Thank you.
Gidday Julito,
The short answer is that Lenders Mortgage Insurance insures the lender, which means they can decide when it is necessary and when it is not – A lender can charge LMI at an LVR of 20% if they want to. It's up to the lender and it's one of those costs which is not in the Comparison Rate and often overlooked by the rate focussed shopper.
80%, whilst being a generally accepted threshold, is not a hard and fast rule at all. It depends on lender, product and a range of other things. Even the majors have reduced LVR's for certain products such as Low Document loans etc.
You can ask your lender to review the fees (don't ask, don't get), but really you are now starting to see the real price of choosing this lender in the first place. If they say no to waiving fees, you either pay it, or move on.
Julito
If you are an investor I would bite the bullet and get out now. Otherwise you are going to be hit with this problem everytime you want to increase your loan – no matter what the LVR you will have to pass the LMI hurdles.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Michael and Terryw, I’ll try to ask and see if there is any way I can escape.
Good luck.
Not often in the current climate will a lender waive the LMI premium.
Richard Taylor | Australia's leading private lender
Don't ask, don't get Richard.
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