What happens when a fixed IO loan expires...

[tubs]

I've got a fixed IO loan with Westpac which is due to finish next year (thank goodness). But the new repayments were HIGHER than the current ones.

What they automatically do is change it to a variable P&I loan.

All I had to do was call them and get it changed to a variable IO loan, plus pay $300.

Anyway, just be careful because if you dont check, you could end up on a P&I loan when you dont want it.

 

[Aaron Sice]

i thought any banking product - when expiring - reverts back to standard variable P&I....?

 

[Rob Williams]

I think that situation is pretty much the same for all IO loans, even those on variable. They revert to a P&I loan at the end of a fixed term. You will find the details in the mounain of doco they send you when you sign up.
It's an easy way of the banks getting yet another fee out of you for doing two tenths of bugger all.

 

[wylie]

We are about to finish our fourth year of IO with Westpac. We asked to fix two loans for two years. They sent us a letter offering only one year due to the fact that our loan approval was for IO for five years, then 25 years P&I. Our broker called and arranged things, at no cost to us.

I am curious about why you were charged $300 to do this. We are on a professional package, so maybe that is why we were not charged. If you are on a package, perhaps check to see if the charge should be waived.

 

[Propertunity]

The nice people at Macquarie Bank with whom I have a couple of mortgages, sent a letter offering an extension of a further 5 years of IO since my initial 5 year IO period was about to expire.

They even worded the letter in such a way as to say "if we don't hear from you to the contrary, it goes 5 more years IO". Sweet. Then they called to make sure that was what I wanted - since I did not reply to the letter.

 

[tobe]

I wish ANZ would do that.

Mine returned to variable, and P & I, and they had me at standard variable, not the discount. To rollover IO is credit critical, involving a whole new application etc. When I asked them to change the interest rate back to the discounted rate they did,and I assumed that would lower the repayments, Im used to IO I guess. Another phonecall, 'oh you wanted to reduce the repayments? I can make that change for you too'. Assume nothing.

 

[Propertunity]

tobe, maybe you don't owe them enough money LOL

 

[Yerfdog]

Anyway, just be careful because if you dont check, you could end up on a P&I loan when you dont want it.

I think you might have forgotten what you signed. Just refer back to your original fixed loan document which you signed years ago, it would state clearly what should have happened after the fix period expires. Even for variable I/O loan for 30 years, the loan doc would state I/O for the first 5 - 10 years then convert to P/I loan, but you can certainly call and re-new the I/O again.