The off topic thread #2

[elhadjihenry]

An offset account is like a savings account of sorts, where whatever you save in that account is offset against your mortgage in this case, which means you’re only charged interest on the amount that isn’t covered. (Say you have a $500k loan and you have $100k in the offset account, you’re only charged for the interest on $400k.)

In this example, you’ve basically got it in the fact you’re taking $10k from the account to pay on furniture. $35k went direct to the mortgage, and well, $5k is still in the bank. So you're paying interesting on $10k more on that loan by those actions.

Of course, needless to say, once you commit that payment, you can't take it back. At least with the offset account, it's flexible whenever you're in need of an emergency.

The only reason why you’d want to pay off directly now is if you’ve got a variable rate and you feel that the rate is going to be higher.

If the loan has a redraw facility you can take back anything you've paid on top of the required payments, it's just a bit more difficult than withdrawing money from an offset account. From memory most loans have a minimum amount you can redraw and there may be a fee involved also.

 

[Pykie]

Anybody got a fair idea how offset accounts work re: mortgage?

For arguments sake, let's say we have 50k by the time of settlement. If we want to throw 35k straight onto the mortgage, spend 10k on furniture etc, and keep 5k in the bank - does all of it become redundant as it's an offset account and goes straight to the mortgage anyway, and we just take out what we need/want?

Done a bit of a shit job at explaining it, sorry if I am unclear. Any advice would be appreciative. Cheers fellas.

Yes essentially, you are paying the same amount of interest weather your pay off that 35k or leave it in the offset account.

As has been said above, redraw facilities only work on those amounts payed above your minimum contributions.

If this is your first place, my advice would be to keep that 35k in your bank for at least 6 months to make sure you have covered all contingencies. 5k saving would get swallow up pretty quickly by even the most minor problems.

 

[SM]

On the topic of mortgages, I'm heading into the bank next weekend to chat to them about my options, with Mum along because she's interested in being my guarantor, but only if the risks to her are minimal. What sorts of questions should I be asking them? This is just a general sort of query, not going in there to actually sign up to a mortgage.

 

[Fryer Tuck]

On the topic of mortgages, I'm heading into the bank next weekend to chat to them about my options, with Mum along because she's interested in being my guarantor, but only if the risks to her are minimal. What sorts of questions should I be asking them? This is just a general sort of query, not going in there to actually sign up to a mortgage.

Hmm, have you found out what your limits are? If you haven't that would be the first thing so they can gauge exactly how much they could potentially lend you.

Then there's the rates (also if they are fixed or variable) and what fees will you be charged (be wary of prepayment fees, which is the price of paying a mortgage too early). You should ask if you can lock the rate at a certain time, and if there is a fee to do so.

There is the potential schedule should one go ahead with it (so you know exactly what sort of impact a loan would have). There is mortgage insurance and its costs (after all, anything can happen.)

You should also ask them what exactly is required to get an approval and how long it would take to get it approved, and when you can decide to pull out of accepting a loan (this is after you get full approval, but usually before the mortgage documents are actually prepared where you can pull out for free.)

Just to know where you stand, just going off by what was given and what I'd do at least.

 

[SM]

Hmm, have you found out what your limits are? If you haven't that would be the first thing so they can gauge exactly how much they could potentially lend you.

Then there's the rates (also if they are fixed or variable) and what fees will you be charged (be wary of prepayment fees, which is the price of paying a mortgage too early). You should ask if you can lock the rate at a certain time, and if there is a fee to do so.

There is the potential schedule should one go ahead with it (so you know exactly what sort of impact a loan would have). There is mortgage insurance and its costs (after all, anything can happen.)

You should also ask them what exactly is required to get an approval and how long it would take to get it approved, and when you can decide to pull out of accepting a loan (this is after you get full approval, but usually before the mortgage documents are actually prepared where you can pull out for free.)

Just to know where you stand, just going off by what was given and what I'd do at least.

Thanks for those. In terms of getting a guarantor, how does that all work? I'd assumed it was effectively the guarantor putting a property up as collateral to securitize the mortgage, is that basically how it works? So the risk to Mum would therefore be that if we defaulted, she would have to cover the shortfall?

 

[glenferry23]

Thanks for those. In terms of getting a guarantor, how does that all work? I'd assumed it was effectively the guarantor putting a property up as collateral to securitize the mortgage, is that basically how it works? So the risk to Mum would therefore be that if we defaulted, she would have to cover the shortfall?

Yes, that is correct. If you defaulted on your loan, and if there was an arrears remaining after the bank (or you) sells your home, then the guarantor would be called upon to cover the arrears.

If the guarantee is also supported by an additional property, then that too could be called upon to realise the remaining balance owing.

 

[Fryer Tuck]

Thanks for those. In terms of getting a guarantor, how does that all work? I'd assumed it was effectively the guarantor putting a property up as collateral to securitize the mortgage, is that basically how it works? So the risk to Mum would therefore be that if we defaulted, she would have to cover the shortfall?

Well, your guarantor (in this case, your mum, which would be acceptable, since in most cases, they have to be immediate family members) will help you get any extra funds you may need by using the equity in their own property to be used as extra security (the thing is though, the bank must have reason to believe that you can service the loan by yourself, the guarantor is only used to unlock extra funds that you may not have had access to.)

Of course, if you're falling short of your payments, or can't pay it off, the bank will then ask your mum to make the payments. The guaranteed amount can range between 20% to the full loan (this will be agreed upon in your papers.)If there is a property under the guarantee, that could potentially be called upon as well.

Guarantors can really only come into effect if you can service the loan on your own income, so it shouldn't be an issue usually.

Her risk is really only as risky as you make it out to be. If you're working a decent job, I think your mortgage limits will be surprisingly decent. If you need just that little bit extra, that's where your mum comes in.

Do note that if she takes up the position, her own borrowing will be limited. There's very little upside to being a grantor other than the love of her child, especilly if anything goes wrong (don't worry, I have faith that you will be able to do it well, so she should have no worries.)

 

[SM]

Well, your guarantor (in this case, your mum, which would be acceptable, since in most cases, they have to be immediate family members) will help you get any extra funds you may need by using the equity in their own property to be used as extra security (the thing is though, the bank must have reason to believe that you can service the loan by yourself, the guarantor is only used to unlock extra funds that you may not have had access to.)

Of course, if you're falling short of your payments, or can't pay it off, the bank will then ask your mum to make the payments. The guaranteed amount can range between 20% to the full loan (this will be agreed upon in your papers.)If there is a property under the guarantee, that could potentially be called upon as well.

Guarantors can really only come into effect if you can service the loan on your own income, so it shouldn't be an issue usually.

Her risk is really only as risky as you make it out to be. If you're working a decent job, I think your mortgage limits will be surprisingly decent. If you need just that little bit extra, that's where your mum comes in.

Do note that if she takes up the position, her own borrowing will be limited. There's very little upside to being a grantor other than the love of her child, especilly if anything goes wrong (don't worry, I have faith that you will be able to do it well, so she should have no worries.)

Yeah she doesn't borrow anything and has no mortgage so I think on that front she'd be ok. Am I right I understanding that having a guarantor effectively means I don't need a deposit? Or is that not right.

 

[Fryer Tuck]

Yeah she doesn't borrow anything and has no mortgage so I think on that front she'd be ok. Am I right I understanding that having a guarantor effectively means I don't need a deposit? Or is that not right.

I think that is the case. Having a guarantor removes the requirement of insurance and as far as I'm aware, the deposit as well (I don't know if that's all cases, but you should be able to do it without the deposit.)

 

[SM]

I think that is the case. Having a guarantor removes the requirement of insurance and as far as I'm aware, the deposit as well (I don't know if that's all cases, but you should be able to do it without the deposit.)

Ok great that was my understanding, and my whole motivation behind it as it means I don't have to spend years and years saving up for the 20% deposit. As far as borrowing limit goes, as you say that's dependent on my earnings so isn't hugely affected by a guarantor anyway. I'll chat to them about it this weekend with her, and if the risk can basically be summarised by my job security, I would hope she's comfortable with that as my job is pretty damn secure haha.

 

[Pykie]

In the current climate I'd be surprised if they did a 100% loan on a first home buyer. The guarantor usually mitigates the mortgage lenders insurance, but they still require a deposit, all be it probably lower. But usually 10%

Personally, I haven't even gone into a bank to talk about prospective borrowing, I use a broker for everything.

 

[NUFC Tiger]

I used a mortgage broker as well as I found they were somehow able to get a better deal for me (bought my first place about 2.5 years ago). Initially I went to both the NAB and CBA who I had accounts with and got fairly comparable mortgage offers - though I was hoping/expecting more than what they presented. I went with a company called Mortgage Choice and they were really helpful. They were able to get the CBA to offer an improved mortgage which I ended up taking.

SM have you played around with any mortgage calculators yet? Most of the big banks have free to use ones on their websites so might give you an idea kind of starting point you might be able to get. Similar to you, I had my parents go as guarantor - from what some mates have told me, the market is very hard to enter without having a guarantor helping you out. Must be very tough for those who've had to go it alone I suppose.

 

[SM]

In the current climate I'd be surprised if they did a 100% loan on a first home buyer. The guarantor usually mitigates the mortgage lenders insurance, but they still require a deposit, all be it probably lower. But usually 10%

Personally, I haven't even gone into a bank to talk about prospective borrowing, I use a broker for everything.

Yeah I think at this stage it's more just to get assurances for Mum, and we'll then contact a broker to figure out the most affordable avenue.

Fair enough on that first point though, I've heard conflicting reports about how much they're willing to lend which is what I wanted to suss out, but 10% is certainly a lot better!

 

[SM]

I used a mortgage broker as well as I found they were somehow able to get a better deal for me (bought my first place about 2.5 years ago). Initially I went to both the NAB and CBA who I had accounts with and got fairly comparable mortgage offers - though I was hoping/expecting more than what they presented. I went with a company called Mortgage Choice and they were really helpful. They were able to get the CBA to offer an improved mortgage which I ended up taking.

SM have you played around with any mortgage calculators yet? Most of the big banks have free to use ones on their websites so might give you an idea kind of starting point you might be able to get. Similar to you, I had my parents go as guarantor - from what some mates have told me, the market is very hard to enter without having a guarantor helping you out. Must be very tough for those who've had to go it alone I suppose.

Cheers, yeah sounds the way to go.

 

[Cruyff14]

An offset account basically replaces your savings account. At least that's my understanding. So you'd basically have all your pay and everything going into it, and you'd just withdraw what you need. Basically means you're paying as little interest as possible.

Yeah, that's how I understand it too.

An offset account is like a savings account of sorts, where whatever you save in that account is offset against your mortgage in this case, which means you’re only charged interest on the amount that isn’t covered. (Say you have a $500k loan and you have $100k in the offset account, you’re only charged for the interest on $400k.)

In this example, you’ve basically got it in the fact you’re taking $10k from the account to pay on furniture. $35k went direct to the mortgage, and well, $5k is still in the bank. So you're paying interesting on $10k more on that loan by those actions.

Of course, needless to say, once you commit that payment, you can't take it back. At least with the offset account, it's flexible whenever you're in need of an emergency.

The only reason why you’d want to pay off directly now is if you’ve got a variable rate and you feel that the rate is going to be higher.

We just thought whacking a whole chunk on when we move in obviously reduces our loan (in this stance it would slash it down 35k), and would be a good move.

Yes essentially, you are paying the same amount of interest weather your pay off that 35k or leave it in the offset account.

As has been said above, redraw facilities only work on those amounts payed above your minimum contributions.

If this is your first place, my advice would be to keep that 35k in your bank for at least 6 months to make sure you have covered all contingencies. 5k saving would get swallow up pretty quickly by even the most minor problems.

Yeah, it's our first place. We get paid on alternate weeks (which is very handy). I'm a tightarse so I will be wanting to try and put as much money onto the mortgage as quick as I can.

35k in the bank - so you mean don't set up an offset account? Contingencies? Like what, unexpected bills etc?

Gf wants a new car next year (will be earning at least 25k more than she is now), and is hoping we'll be ahead enough, so we can redraw and pay the car off in one hit without wanting to take another loan out.

I should probably speak to our broker lol.

 

[jd2010]

Redound my Suits addiction. Only about one whole season behind now

 

[moomba]

kreglze

Is the Woodstock pub still open? Just drove past, looked closed down but I just caught a glimpse so might have been wrong building.

 

[Cruyff14]

@kregize

Is the Woodstock pub still open? Just drove past, looked closed down but I just caught a glimpse so might have been wrong building.

kreglze

 

[kreglze]

@kregize

Is the Woodstock pub still open? Just drove past, looked closed down but I just caught a glimpse so might have been wrong building.

I don't think so. Haven't been that way in a while though, since I have been here at least, it has always looked a little run down.

 

[jd2010]

US sports fans might find this interesting

Oakland Raiders have trademarked the name Las Vegas Raiders.

Loosely a raiders fan (more of an NFL fan as a whole than having a team) pretty exciting stuff

 

[Fryer Tuck]

US sports fans might find this interesting

Oakland Raiders have trademarked the name Las Vegas Raiders.

Loosely a raiders fan (more of an NFL fan as a whole than having a team) pretty exciting stuff

Big call that one. Vegas is a very risky option, I heard that teams that have tried have failed pretty badly, and considering the nature of the city and its population, I guess you can see why.

The pros is that if it somehow works, they've got a top 30 metro area all to themselves (in regards to all sports), but a lot of work will need to be done.

 

[elhadjihenry]

Redound my Suits addiction. Only about one whole season behind now

To be honest you haven't missed much, show has been going downhill since season 3 imo.

 

[SM]

I've only just started Season 1 of Suits, loving it so far! Sucks if it gets shit after Season 3.

 

[glenferry23]

Barely watch TV these days but just downloaded Ballers and really enjoying it so far.

 

[elhadjihenry]

I've only just started Season 1 of Suits, loving it so far! Sucks if it gets shit after Season 3.

First few seasons are great, think they are just running out of ideas now and the storylines/characters are becoming annoying.

Barely watch TV these days but just downloaded Ballers and really enjoying it so far.

Yep digging this too just for pure entertainment value. Basically Entourage for the NFL.

The Get Down another show that's doing it for me at the moment, Baz Lurhmann created dramatisation of the birth of hip hop in the Bronx in the 70's.