[Ally'smum]

I have a home loan with Westpac and we have some extra money in the loan as well as money in an offset account. I am worried about our ability to save, we seem to always be dipping into the offset, so I was wondering if I could pay extra money into the loan, then reduce the loan limit so it wouldn't be sitting there for us to access.

Does anyone else do this? How often can you do it? What is a reasonable amount?

If I reduced the home loan by $1000 each month, then called the bank to reduce the limit, would they get annoyed?

[Chubbles]

Someone will correct me if I'm wrong but I'm pretty sure you can't change your home loan limit.

[MrsLexiK]

sorry OP just wanting to clarify - are you talking about paying x amount off and then refinancing your loan (so say you have paid $70K off a $200K mortgage including all your monthly repayments you then get a loan for $130K thus reducing your repayment amount)

or are you asking whether you put say $10K into the loan in advance and reduce your mortgage repayment each month by $1000 until the $10K in advance is no longer in advance? (so your monthly payment is made up of $1000K from the advance figure and $300 from your own money)

[Sinister Bonnet]

Without a whole new mortgage and the costs associated with that I don't think you can. Mortgages are calculated across the life of the loan, they don't work like credit cards.

[Ally'smum]

I meant that if we owe $350k and I pay $10000 into the loan, then call the bank and reduce the loan to $340k.

That way the money isn't sitting there to be redrawn (and our monthly repayments could be reduced to reflect the new amount outstanding over the term of the loan).

Not refinancing as such, just as you can call them and ask to 'top-up' or increase the limit, I was wondering if you could decrease the limit.

Trying to get our debts down...

[laridae]

I put extra on my loan & just don't redraw it. So its still available in case of emergency - but not as accessible as the offset.

I think you can call them & get them to re-calculate the repayment based on what you paid off already. I know they recalc the repayment when I redraw (which I've done once for a specific purpose), and they can do it if interest rates drop if you ask (which I've also done - as it was up around 8.5% when I first got the loan).

You can still redraw though - it doesn't affect the actual value of the loan, they just put repayments up again if you do redraw.

This post has been edited by laridae: 31/01/2013, 12:58 PM

[Bluenomi]

Coudn't you just get rid of the redraw facility? That would be much easier.

[abcd_efg]

Yep, just get rid of the redraw/offset.

[WinterDancesHere]

I suspect that an offset account may not be the best option for you.

An offset account is fine to draw from (not really redrawing), that is the purpose, put as much money in there to reduce the interest you are paying day-to-day. It's why they are often used in conjuction with credit cards.

If you want to actually pay additional into your loan you can request the bank capitalise the payments which will reduce your required repayments, but not the loan amount as such.

I would suggest talking to the bank and seeing what they suggest, you are probably paying fees for the offset while not using it to the best advantage.

[Therese]

I would just get rid of the redraw option.