Split account with offset correct usage

I have been approved with 100K equity from my loan provider.
The lender has created a new loan and offset account for the split. The funds are now released by the lender and they kept it in the offset account.
For investment purposed, should I draw down the loan and make the payment from loan account or I can make the payment from offset account?
One issue I have with the lender is that if I pay down the loan in full, the loan account would get locked. System thinks I paid off the loan. What is the best practice?
 
As long as no other money moves through the new offset account, it should be okay to leave it as it is. Only use this money for capital expenditure on investments.

If you want to move it back to the loan, what a lot of people do is they leave a nominal amount owing (such as the fees incurred in the restructure) so the loan account isn't closed.
 
If you want to move it back to the loan, what a lot of people do is they leave a nominal amount owing (such as the fees incurred in the restructure) so the loan account isn't closed.

Yep - important to do this. I'd leave $1k owing otherwise there's a chance that the lenders automated system will assume you've been a good little borrower and have paid off your loan....in two days :)

Cheers

Jamie
 
Best practice is not to do what you have done but to use a LOC and pay directly from the loan. Anything else you run the risk of losing deductibility of interest.

Thanks Terry, Jamie and Peter. Unfortunately the lender don't have LOC facility. With the limitations, I think the best is to move the offset credits to loan account and pay investment expenses from loan account? I will keep minimal cash in the offset account (fees for the additional loan) so that the account won't get closed.
 
Hiya

If the offset is purely being used to park your equity release funds than I'd just leave it as is.....I'm not an accountant though :)

Cheers

Jamie
 
Thanks Terry, Jamie and Peter. Unfortunately the lender don't have LOC facility. With the limitations, I think the best is to move the offset credits to loan account and pay investment expenses from loan account? I will keep minimal cash in the offset account (fees for the additional loan) so that the account won't get closed.

If that is possible that is the next best solution - also consider refinancing to another lender with a LOC.
 
Hiya

If the offset is purely being used to park your equity release funds than I'd just leave it as is.....I'm not an accountant though :)

Cheers

Jamie

I think this is the key....If the offset account created is just to park the loan money until needed should b ok.....as always confirm with ur accountant.....curious, who is the lender?
 
If you want to move it back to the loan, what a lot of people do is they leave a nominal amount owing (such as the fees incurred in the restructure) so the loan account isn't closed.

Pete/Jamie, any idea how is ANZ system works on this. i mean if you draw the equity and park it back to the loan until needed.....does it close the account? wat's the process if the account gets closed and you need money....is that more of a hassle.??

Pete, what fees you are talking abt which can be left so account stays open....my understanding was if there are any fees due as part of loan it gets deducted from Loan balance and only remaining amount will be settled...
 
Pete/Jamie, any idea how is ANZ system works on this. i mean if you draw the equity and park it back to the loan until needed.....does it close the account? wat's the process if the account gets closed and you need money....is that more of a hassle.??

...

Need to leave $1k owing in the account in order to avoid it being closed. If it is closed - it can be reinstated but it's quite a painful process.

Cheers

Jamie
 
ANZ can be a pain in the neck in this example, we've had to go back and get them to reopen loans on several occasions. The rectify the problem fairly easily but it's still a pain in the neck.
 
Does the offset have a bank card you keep in your wallet? If so you could find yourself at the Cassie contaminating your loan after a few too many bevvies!
 
Does the offset have a bank card you keep in your wallet? If so you could find yourself at the Cassie contaminating your loan after a few too many bevvies!

Yes it has a bank card but I cut it into pieces :)
There is another bank card for the PPoR offset account which is good enough for me.
 
Back
Top