Mortgage Developments 24th March 2020

To say that things are changing rapidly at the moment would be a huge understatement!  Given these unprecedented circumstances I want to make sure that you are kept informed of developments in the mortgage world and related mortgage issues that may affect your financial circumstances.

THE DIFFERENCES BETWEEN REDRAW & OFFSET BANKING FACILITIES

Redraw

The redraw of additional repayments into a home loan are usually at the lenders discretion.  A lender may cancel/refuse a redraw request at any time.  One of our panel lenders specifically states that “The Bank does not promise it will relend you the redraw amount. This request is subject to its consent.”

Many borrowers park their savings in their home loan with the understanding that they can access their savings via redraw.  With the potential for lenders reserving the right to refuse a redraw request, it is important that borrowers remain mindful of where their savings are held and what access to these savings they have.

Offset Accounts

Offset accounts on the other hand are savings accounts.  An offset account is a separate deposit account, whereas a redraw facility is not a separate account, but a feature attached to the loan.  A regular account statement would be issued for the Loan Account and a separate statement would be issued for the Offset Account.

A lender cannot refuse a customer having access to their own savings (except in the event of a loan default).  Furthermore, savings accounts may offer protection under the government guarantee on amounts up to $250,000*.

UNCERTAINTY OR FINANCIAL PRESSURE

Many lenders are reviewing their capacity to assist borrowers experiencing uncertainty or financial pressure as a result of the COVID 19 pandemic.  Some lenders have announced the possibility of being able to help existing borrowers with a range of support measures including the potential to review home loan repayment obligations for a limited period of time.

If you are experiencing uncertainty or financial pressure, we encourage you to contact your lender to discuss your situation and learn about ways the lender may be able to assist you.  As these measures vary from lender to lender, it is important that you contact your lender to discuss the specifics about your situation

Melbourne Mortgage Advice remain open for business and whilst face-to-face meetings are presently on hold, we remain at your service via email and telephone and welcome the opportunity to assist you with your mortgage requirements during these difficult times.

* https://www.guaranteescheme.gov.au/qa/deposits.html

Disclaimer:  This information does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant lender terms and conditions.  Your full financial situation would need to be reviewed prior to acceptance of any offer or product.