Can I use term deposit as security for the loan?

[XMW]

Need your help here folks.

Due to the sale of my main residence ( other two IP loan secured against main residence), I'm in the situation now with loan / property value ratio at 83% when it comes to settlement of my main residence. Both IP loan is at fixed rate so there will be a hefty break fee If I want to use sales proceeds to reduce IP loan to less than 80% value.

Just wondering if I can use a term deposit as security for my loan to avoid mortgage insurance. Or alternatively, what other kind of asset will bank consider as a security (eg shares?).

You input is much appreciated.

Thanks,
XM

 

[Terry_w]

Possible, but not easy to do.

 

[Aaron_C]

Who's the lender? You can use term deposit as substitute for real estate security, yes.

 

[XMW]

Thanks Terry, Aaron

Loan is with St George. Initially I spoke to their mobile lender that the answer is yes. However when I contacted my assessor from mortgage discharge department, the answer is no so will need to check with them on Monday.

 

[Aaron_C]

The mobile banker is correct. Alternatively you can pay down a bit of the fixed loan (I think $20k pa for St George from memory) to avoid the LMI/break fees.

 

[Ausprop]

my experience with this has been pretty straight forward

 

[Brady]

Security substitution, shouldn't be a problem.

 

[XMW]

Spoke to mortgage discharge department today and I was told I can not use term deposit as security

It appears the only option for me is to break the fixed rate loan.

 

[Terry_w]

Spoke to mortgage discharge department today and I was told I can not use term deposit as security

It appears the only option for me is to break the fixed rate loan.

Perhaps not the right section to speak to.

 

[Brady]

Spoke to mortgage discharge department today and I was told I can not use term deposit as security

It appears the only option for me is to break the fixed rate loan.

Did they say why you couldn't secure the loan with cash rather then property?

 

[tambourineman]

We are currently doing this with Macquarie

 

[Rolf Latham]

old maq wasnt any good with ports, dunno if the new new one is any better


ta
rolf

 

[james55]

Did they say why you couldn't secure the loan with cash rather then property?

You can only substitute with cash for the short term. depends which assessor you get.

You will need to tell them you intend to substitute with another property in the short term.

Sounds like Lmi is involved, in which case it would need to go through their mortgage insurance department if you still want to keep Lmi when you substitute with the new property. You need to find the new property within 3 months.

 

[Point North]

Breaking Fixed term

Most people do no realize that in lots of instances the bank no longer controls your mortgage. The contract (paper) has been on sold via a securitisation pocess to another financial intermediary who are now the owner of your mortgage and your bank has't much say in breaking these terms. This may not help but give you something to think about.

 

[Ausprop]

Most people do no realize that in lots of instances the bank no longer controls your mortgage. The contract (paper) has been on sold via a securitisation pocess to another financial intermediary who are now the owner of your mortgage and your bank has't much say in breaking these terms. This may not help but give you something to think about.

welcome to the forum.

this is an interesting thought when you consider you are contractually bound to terms that are not defined. e.g. NAB goes broke and is rescued / bought out by American Greedy First Standard Bank.... they decide interest rates are not reflective of their risk and whack 3% on top of all variable rates

 

[XMW]

Spoke to St George again today and I was told I can use term deposit as security for a short term only, eg a few month to search for a new property.

So I will go down the path of paying 40k additional funds with a penalty around $700 which is better than I thought. This way I can maintain 80% loan to valuation ratio.

 

[Shaneelastic]

You could request lmi waiver, I get up to 85lvr without lmi, so maybe worthwhile asking? It's a different bank though

 

[Bigtone]

Spoke to St George again today and I was told I can use term deposit as security for a short term only, eg a few month to search for a new property.

So I will go down the path of paying 40k additional funds with a penalty around $700 which is better than I thought. This way I can maintain 80% loan to valuation ratio.

just use the term deposit as security, their incompetence is likely to result in no one noticing if you leave it there for a couple of years and when/if they notice you get property re-valued and then probably at 80% anyway

from what I have seen the banks put their staff with the lowest IQ's and worst customer service into mortgage discharges and progress payments

 

[pinkboy]

just use the term deposit as security, their incompetence is likely to result in no one noticing if you leave it there for a couple of years and when/if they notice you get property re-valued and then probably at 80% anyway

from what I have seen the banks put their staff with the lowest IQ's and worst customer service into mortgage discharges and progress payments

Where do they put the other 10% of the workforce with an IQ of 80+?

pinkboy

 

[james55]

just use the term deposit as security, their incompetence is likely to result in no one noticing if you leave it there for a couple

Do you think the banks care? They are just abiding by regulations. Think about it. Interest paid on term deposit < rate on mortgage. Yeh keep it there long term, the bank wins either way.

Also interest on term deposit is not paid out to you. So you might have difficulty servicing the loan when you're not receiving income from the term deposit.