Use Equity to reduce interest?

Hi All,

First of all just wanted to say great forum with lots of helpful info. :)

I'm still a newb at this so just wanted to get opinions/re-assurance that what I'm thinking is right.

Just under 2 years ago my wife and I got a house built (PPOR). It was valued at $420K on completion. Borrowed about 95% so owed about $400K on a standard variable rate loan.

The debt is now down to $370K but I believe the value of our house has gone up. Houses in our neighbourhood have been selling from $500K+.

So here is my question:
Just say our house value is now also $500K, would we be able to refinance/top-up our loan to 95% of $500K and put the new funds in an off-set account?
That way we would be getting charged less interest?

I hope that made sense.

Thanks in advanced.
BB.
 
So here is my question:
Just say our house value is now also $500K, would we be able to refinance/top-up our loan to 95% of $500K and put the new funds in an off-set account?
That way we would be getting charged less interest?
.
Short answer: NO.

If you borrow an extra 50k you're paying interest on the 50k. Putting that 50k into an offset then means you pay interest on 50k less. Plus minus zero.
 
not to mention most lenders dont like refinances at 95%.

What is a good idea is to refinance, and use the cash for an income producing investment. You can then claim the portion of the loan used for the investment in your tax, and have more after tax income to contribute to your home loan/offset account/wealth creation strategy than you do currently.
 
The best way to get the best saving would be to negotiate a better rate at an original 95% lend I would guess your rate is high and can earn you a big saving now.
 
The best way to get the best saving would be to negotiate a better rate at an original 95% lend I would guess your rate is high and can earn you a big saving now.
True. A few lender were (and still are) charging premium interest rates for loans over 90%. A few lenders are also giving discounted rates when the LVR drops below 75%.

This might save you a few hunderd dollars a year, so here's the big secret to saving money on you home loan...

Take a hard look at your budget, fund surplus's and make extra payments.
 
True. A few lender were (and still are) charging premium interest rates for loans over 90%. A few lenders are also giving discounted rates when the LVR drops below 75%.

This might save you a few hunderd dollars a year, so here's the big secret to saving money on you home loan...

Take a hard look at your budget, fund surplus's and make extra payments.
what lenders>?
 
Hi Sasha

Advantedge, NAB and CBA are some of the lenders that have 'official" lvr pegs for increased discounts

In some threads here in recent times om "what discount" are u getting...............and comparing all an sundry, as if all loan risks were equal, and only the volume affected the pricing.

At the edge, thats not the case, there are a bunuch of reasons why a lender might not increase a discount.

ta
rolf
 
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