Equity - reno funds

[Azazel]

Hi guys, was just reading all of the helpful replies in: http://somersoft.com/forums/showthread.php?t=107153
Started to get a bit paranoid. We're in the process of getting equity of $10k for a small reno, is it fine to leave it in the offset account when we get it?
We currently have the IP rent paid into that account, and the repayments come out of there. We also pay our own rent into there, and then transfer it to the normal account and pay it to the RE via bank cheque.
Should we stop this practice now and only deposit our rent into the normal account, not the offset account? And not leave any savings in there, so no offset benefit?

 

[vaughan]

Is the reno for your IP or your PPOR?

 

[Paul@PFI]

Do you have a redraw on that loan ? If so what stops you banking it back to the loan and drawing when needed ? Problem solved. Just CHECK before acting.

The reason banks add a new loan to offset is because the loan must be advanced under a mortgage and so that can reset balances, repays etc etc. I suspect many banks are ********s too and will gladly put new loan money to a zero interest savings account so they make $.

 

[Terry_w]

Hi guys, was just reading all of the helpful replies in: http://somersoft.com/forums/showthread.php?t=107153
Started to get a bit paranoid. We're in the process of getting equity of $10k for a small reno, is it fine to leave it in the offset account when we get it?

Not fine if you want to claim the interest as you will be mixing it with non borrowed money.

 

[Azazel]

Do you have a redraw on that loan ? If so what stops you banking it back to the loan and drawing when needed ? Problem solved. Just CHECK before acting.

We have an offset account, interest only - so there was nothing to redraw. Thanks, I'll check.

 

[Azazel]

Not fine if you want to claim the interest as you will be mixing it with non borrowed money.

Should I ensure all money is transferred out of that account before the reno funds come in from the bank? The rent from the IP goes in to there too, mortgage repayments come out. That's non borrowed money. Hmm...

 

[Terry_w]

Should I ensure all money is transferred out of that account before the reno funds come in from the bank? The rent from the IP goes in to there too, mortgage repayments come out. That's non borrowed money. Hmm...

Open a new clean account and don't put any money in at all. Just deposit the borrowings - or instruct the bank to deposit the money in there.

 

[Azazel]

Open a new clean account and don't put any money in at all. Just deposit the borrowings - or instruct the bank to deposit the money in there.

No worries, thanks Terry!

 

[Azazel]

Open a new clean account and don't put any money in at all. Just deposit the borrowings - or instruct the bank to deposit the money in there.

Hi Terry, funds have been deposited, they will create a new account for us, just wanted to double check, is a new offset account Ok? Or a 'normal' account?

They also said if it goes into the loan account for redraw it needs to sit for 30 days before it's available to redraw.

 

[Terry_w]

Normal or offset won't change things

 

[Azazel]

Normal or offset won't change things

Great, thanks for the reply!