CBA - How to prepay interest

[Raja]

Hi All,

Was wondering if someone could help. I was hoping to make a lump sum payment for about 4 months of interest before July 1st. The loan account I have with CBA is a interest only standard variable Investment loan.

I have been told by the bank the only way to do this would be to change the loan type to Interest in Advance and that I would need to then pay for the interest in advance for the full year.

Would anyone know if there is any other way I could just arrange to make a lump sum payment on interest without changing the loan type and having to pay for the full year?

Thanks,

Regards,

Raja

 

[tobe]

You can pop as much as you like into the loan whenever you like. However you will still need to make interest payments on the balance when they fall due. With some lenders they can arrange to change your direct debit from an outside account, to the loan account itself, or change from direct debits to direct credit to your loan account. This would mean instead of the bank reaching into your savings account for the payment, they would reach into your loan account, or wait until you have pushed the money into the loan account. Im not sure if the CBA will let you do this. Try ringing them again, and instead of asking them if you can pre-pay interest, ask them if they can take the monthly repayments from the loan account instead of another account, or if you can manually make the payments each month. This should give you the desired effect. You can only have interest in advance loans as a new product, or product switch, and most of the time it needs to be at least 3 months in advance depending on the lender, and it natually needs to be a fixed rate.

By the way, this that I am proposing does not entitle you to a tax deduction, if that is why you are trying to do it, you are not paying in advance, you are just parking the money in your loan account, and having the regular payments come out of there instead, when they fall due.
All of the banks have regualr specials this time of year on their interest in advance loans, but for my money, they just pull forward next years deduction into this years. If you have a 'tax problem' this year, whats going to change next year? Have you thought about re-finance to interest in advance, and use the top up funds to pay the interest?

 

[yo yo ma]

Would anyone know if there is any other way I could just arrange to make a lump sum payment on interest without changing the loan type and having to pay for the full year?

Why are you trying to do this; are you expecting your income to be significantly less next year?

 

[Spectre]

Try ringing them again, and instead of asking them if you can pre-pay interest, ask them if they can take the monthly repayments from the loan account instead of another account, or if you can manually make the payments each month. This should give you the desired effect. You can only have interest in advance loans as a new product, or product switch, and most of the time it needs to be at least 3 months in advance depending on the lender, and it natually needs to be a fixed rate.

Hi

what tobe has said is dead right, you are just parking the money in the redraw of the loan
In my experience they can take the payments from the loan but you have to have the available credit in the redraw or you can manually pay it but it has to be P&I in order to do so and you wont know what the payment is until after the day it is charged.

If you're looking for a quarterly int in advance then you'd swap to (I think) anz - never used them for that though and it doesnt show up as a product on my system anymore

But raja what you are proposing wont work I dont think the way you want it to

 

[Peter_Tersteeg]

CBA have the ability to pre-pay interest for 12 months, which can be useful for tax purposes.

You will probably find it's a bit late to do this right now though, it takes a little while to set up and the get overloaded with these requests. You need to start the process in early May.

 

[Raja]

Hi thanks everyone for the replies.

Yo yo ma - Reason was so that I could then put the additional tax refund I get into the offset of my PPOR loan. The excess cash is in a new loan offset account and was from the equity in my first IP. I am using some of this cash to fund my next IP purchase and wanted to put the rest towards my PPOR loan but keep the loan fully deductible.

I think I will just repay the next couple of interest payments for the two IP loans with the equity cash and put my own salary towards the PPOR loan.

Thanks

Raja