New Lender says Don't Redraw from old Lender

[datto]

Yea, what's happened here, is a fellow investor I know has just changed lender.

Now get this, the old lender has kept the home loan active. She (the investor) has even received a letter from the old lender saying "thank you for paying off your loan"!

The letter goes on to say "we'll keep your loan active until you instruct us to cancel it (and a fee may be charged for cancellation). In the mean time we'll keep charging you the annual package fee." Even though there is no secured property!

The old loan was a variable loan and had about 20 years to go AND has a redraw facility. Can you see what I'm getting at ching ching!

BUT the new lender has told her "Don't use the redraw facility of the old loan" The old lender has a note on file stating that the redraw cannot be used.

What if, the investor waits say 6 months and then requests a redraw and comes up with a property to use as security. There is over half million $ available. Will the new lender get peeved if this happens. Cheers.

 

[EN710]

I'm a bit slow...

Why is it the new lender business to tell her how to use her redraw fund on the other account?

 

[datto]

Good question EN710. Could be in the contract? Maybe the new lender is worried about over commitment, or servicibility?

 

[mattnz]

I'm a bit slow...

Why is it the new lender business to tell her how to use her redraw fund on the other account?

Because it changes their risk profile for the lender and would constitute a significant change in circumstances, which is sure to be covered within their contract.

Which lender is it and how can I get one?

 

[datto]

Matt. One of the big 4 paid out another of the big 4 LOL.

 

[Aaron_C]

Was this a 'Fast Refi'?

 

[datto]

Im not sure. Could have been.

 

[Mick C]

Sounds like a refinance.

If the investor redraw out of the old loan then the new lender will have a massive "shortfall" so hence why they advised not to redraw because your friend ( investor) would have told the new lender they have "no mortgage" on the property ( since the redraw won't be used).

If the new lender is financing a new purchase, that;s a diff story...

 

[tobe]

fast refi, the new lender takes out insurance, and then funds the loan before they actually get the title off the old lender. Means old lender's retention team cant get a bite. You wont be in the same position in 6 months time. In a couple of weeks time the title will move to the new lender.

 

[datto]

That's right Mick it was a refinance.

So, Tobe, in a few weeks time the old loan will be closed. The banks seem to take their time as the refinance done in late September.

 

[Marty McDonald]

yep def a fast refi I reckon.

Loan paid to $0 by the new bank and then a signed discharge authority requesting the title is sent by new bank to old bank. It can take more than a month for the packet containing the title and discharge of mortgage paperwork to be sent to the new lender and then needs to be processed by them.