Older peoples borrowing power

[albanga]

This sounds like good advice to keep access to a loan when it may be difficult to get one! But isnt redraw just accessing money that is alredy yours? same as money in a savings account? Wouldn't you want the loan available to be able to borrow additional money on top of redraw?

No, a redraw and an offset are two separate things.
An offset is your savings, a redraw is basically you lending money from the bank.

I'll let one of the brokers explain this in more detail

 

[bob shovel]

I probably want clear enough after re reading. Offest is a savings account linked to loan account to reduce interest, but re draw is money paid onto the loan directly to reduce owing then can be re drawn usually at a fee

 

[albanga]

I probably want clear enough after re reading. Offest is a savings account linked to loan account to reduce interest, but re draw is money paid onto the loan directly to reduce owing then can be re drawn usually at a fee

Sorry Bob, are you asking me this question?
If asking me then what you have above is somewhat accurate, a redraw is also additional payments made to reduce interest like an offset, but it is paid into the loan. Yes a number of lenders will charge a fee to access the redraw and also a number also have minimum and maximum amounts you can redraw.

IMO an offset is superior in almost all scenarios and particularly important if you ever plan to turn your PPOR into an IP.

My comment to Paul on his advice was because if the loan is closed and you no longer have any income stream then you simply cannot get a new loan as you need to engage a lender. If however the loan remains open, you can redraw the amount (to a maximum) and do not need to engage any lenders, hence no need to prove serviceability.

 

[Greg Reid]

Bob,
Since NCCP, lenders have taken a far tougher approach for clients over around mid 50's in terms of borrowing. Fortunately they seemed to have relaxed a little from immediately after NCCP but you still have to go through more hoops to make sure loans are suitable and can be repaid or an exit strategy. That said, you can still get finance but you need to ask the question, how do they service a $300k loan after they retire? You may find borrowing for personal investment is an easier option than borrowing to repair a PPOR.

A reverse mortgage is not yet an option for them as 60 is the youngest age a lender will consider, another lender is 63, a couple more is 65 and one is 70. Contrary to earlier comments, rates are (currently) from 6.45%. LVR's would start at 15% at the lowest age bracket.

In my opinion we will see more take up of the RM product as baby boomers enter retirement with large debts and not wanting to use their super to pay down, rather to maintain lifestyle.

 

[Juliana Ardila]

Accessing equity won't be too difficult - especially given the LVR will remain very low and there's lenders that don't have restrictions based on age. Sometimes it can be important to demonstrate an exit plan (e.g. downsizing, superannuation, etc).

As mentioned, so long as they can service the additional debt, shouldn't be a problem.

I agree with Redom

Macquarie is one of them. Downsizing or super would be an acceptable exit strategy