LOC Clawback?

[Yerfdog]

Hi All,

Just listened to a webminar from Property Update http://instantteleseminar.com/?eventid=2676963. In the second question, Ed Chan advised there is a risk of banks clawback unused LOC fund due to the credit squeeze, and suggested to draw down all the fund and transfer it to offset account.

Easier said than done, most of the LOC accounts do not have an offset account. Therefore, if I transfer remaining of the LOC fund to my other loans offset accounts, I may not be able to claim my intererst generated from my LOC as I cannot see there is a valid investment or income produce "purpose".

What are your thoughts? Can bank really claw those unused funds back?

 

[Dunsborough]

Buy some blue chip shares, property trusts etc?
might be the go, is what i have done, gives me accessable liquidity and hopefully long term growth/diversity and ok dividends.
just a thought, dont take as advice, everyones situation varies
cheers

 

[Yerfdog]

Well, those LOC is paying my shortfall, therefore they have to be 100% safe with no risk.

I thought of putting them in a term deposit with a like 7% interest, but with my 9.7% LOC, its not really ideal, and end up my accountant is going to hate me with the mess.....haha.

Thanks for the idea.

 

[Dunsborough]

Rabo online account now paying 8% at call and better for term deposits, still leaves a gap though
cheers

 

[Rolf Latham]

Hiya

I feel the issue really comes down to risk managment..........and it hasnt been thought through

Assume u have 3 ips with lender x

U have an loc over all 3 IPs with a limit of 500 k

Today, u go back to bank x and say, dunna like LOC, please make all my loans term loans with IO< and offset.

All monies mortage doesnt care if its LOC or offset, it becomes the banks money............so unless you park OUTSIDE of the lender, offsets are no diff to LOC in practice.

ta
rolf

 

[BV]

Yerfdog,

A friend of mine had a STGeorge portfolio LOC so he changed over to their advantage saver package which had an offset account and it costed him around $200.

Many lenders will have similar loan packages these days.

Cheers

 

[Medine]

Hi Yerfdog,

We just had this happen to a client. The bank closed their account and THEN sent them a letter saying that they needed to draw down their facility by $100 to keep it going. They had only drawn it down $5 We argued the case to get it reinstated, but the bank will not go for it.

Unbelievable. I am apalled at the shoddy business behaviour. Luckily it was only a buffer for this client. But if you have plans for the money I'd be drawing it down.

Cheers, Medine