My bank has just introduced a $10 a month account keeping fee on my mortgage. I currently have a substantial loan with the bank but it is 100% offset. I asked the bank if there was any way I could get out of paying the new monthly account keeping fee as I do not use this account and am going overseas for an extended period so will need to put money into the account while I am away to prevent having to pay interest.
The bank has said that the only way to avoid paying the fee would be to close the offset account and convert to a standalone loan account. The funds from the offset accounts can be transferred into the loan and be held in redraw where I can access them online any time with no fee.
I originally set up the loan so that if the house became an investment property at some time in the future, I could draw the money out of the offset account to use for another property, and still be able to claim the interest payments against my income. My question is, if I were to change the loan to a standalone loan account with a redraw facility, could I still do what I outlined above? Or would I be seen to have paid off the house and couldn’t claim interest on the debt against my income for tax purposes?
I hope this question is clear, please ask me for further clarification if not.Keep the offset. I’d pay the $10 per month to avoid taxation implications down the track.
I don’t know what rate you have – but $10 per month for a loan with an offset isn’t too bad considering most other lenders charge a package fee that’s $350 to $400 p.a
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Lizu,
The bank has said that the only way to avoid paying the fee would be to close the offset account and convert to a standalone loan account.
Oh, goody !! And then you could receive Interest like 1% instead of the 5% you get as an Offset now. Me, I’d pay the $10 a month and say Thanks !!
An Offset is TOO GOOD an option to just stop it. As you say, it allows you a swift clean, trouble-free exit if you chose to turn it into an IP down the track. $120 a year is a cheap insurance to allow you to do that.
Benny
PS All just an OPINION, as I am not an accredited adviser – so do check the ideas with your adviser.
I wouldn’t be too concerned about the $10 fee if the rest of the loan makes sense for your situation – ie structure, lender choice enhancing not detracting from your long term plans, cost etc.
If the other factors about the loan aren’t sufficient to justify staying with them it may well be worth using this time to consider moving the loan – but not over just a single factor like a $10 monthly fee.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
My question is, if I were to change the loan to a standalone loan account with a redraw facility, could I still do what I outlined above?
=NO
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
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