Would this home loan setup be equal to Line of Credit?

Hi,

Just a quick question...would this home loan setup essentially be the same as a Line of Credit?

1) Interest Only for up to 10 years. Maybe difference where Line of Credits do not have fixed end dates?

2) $0 redraw

Cheers.
 
If you mean I/O plus offset, then it would be effectively the same, but have the advantage over a LOC that you could withdraw funds from the offset for private purposes without contaminating the deductibility of the loan interest.

And as you mentioned, the LOC has interest-only for the life of the product, ie up to 25 or 30 years, but an I/O loan can generally be "rolled over" for a further I/O period anyway.
 
I would say no.

In an Interest Only loan, you would normally draw down all funds for use at the time the loan is taken out. With an approved LOC, you don't need to draw the funds down at all. They can just sit there for use when you want to use them. You can have cheque access, and I think even ATM access (I don't, but I think it's possible). Of course, the bank might pull the plug (although mine never have).
 
In an Interest Only loan, you would normally draw down all funds for use at the time the loan is taken out. With an approved LOC, you don't need to draw the funds down at all. They can just sit there for use when you want to use them. You can have cheque access, and I think even ATM access (I don't, but I think it's possible).
Yes, but if there were excess funds, I assumed you'd fully draw the I/O loan and park the excess in the offset, and that's effectively the same - you only pay interest on the amount you have outstanding. :)

Offset accounts can be accessed via cheque, ATM, phone, internet, etc.
 
Yes, but if there were excess funds, I assumed you'd fully draw the I/O loan and park the excess in the offset, and that's effectively the same - you only pay interest on the amount you have outstanding. :)

Offset accounts can be accessed via cheque, ATM, phone, internet, etc.


While this is true, you would want to make sure that you weren't tempted to use those funds in the offset account for personal purchases.
 
Thanks for the replies everyone.

I realised I didn't not provide the full sentence for the 2) point. I was meant to say $0 redraw fee.

I'm in a situation where I need to get a supplementary loan on top of my current ANZ mortgage to draw on equity.

The equity manager account is higher interest and has yearly account fee. So I'm going for the ANZ Simplicity account without offset. The actual IP loan with another lender has $0 redraw fee with minimum $1000 redraw without offset account unless I pay $15 per month. So it seems to me this is kinda like a LOC with $1000 minimum withdrawal.

I have offset with my PPOR already so not have offset with IP is not a huge loss.

Cheers.
 
As I mentioned to you, don't mix personal and business. The redraw doesn't have the same effect as an offset if you're mixing business with pleasure.
The MB you have chosen should be able to explain this.
 
Hi noisuf

I didn't think that the Simplicity was available as a Supplementary Loan - perhaps ANZ has changed their policy recently?

Ask your broker for cheaper alternatives to BankWest - I love BankWest heaps (they did a deal for me recently which two other lenders had knocked back, so blessings be upon them!) - but there are sharper knives in the drawer!

Cheers
Kristine
 
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