Line Of Credit Vs Borrowing more?
 

hey team, just after a little bit of advice, just thought id ask on here as im sure other have been in a similar boat. Im looking at getting a new car plus need to pay off a few small things. Now ive built up a bit of equity in my house over the last year and a half, (my house is worth probably 140-150k or so more then what i owe on my loan)

So was looking into getting a line of credit (or some banks call it a home equity loan) or either adding more funds onto my existing loan. Now im a little confused as to which way i should go, probably looking at borrowing another $30k, which path did you go down if you have done this? or which path is the better option? i know the fees are higher to setup the home equity loan, but you dont pay any interest until you actually borrow some of the money from the loan. Im with commonwealth bank if this helps. Searching the net so far hasnt really helped, any advice will be greatly appreciated.

PM sent

Please post info in the thread. There may be more people interested in this topic, other than the OP.
Cheers

Re-draw your existing loan?

Sorry to Hijack your thread dude,

BUT,
Yeah as Matty has highlighted, I for one am in almost the exact same situation and looking to do the same in next 1 - 2 months, so would love to hear peoples thoughts.. However I am with ANZ..

[B]**information edited so as not to be specific to the above member's case**[/B]

I work for the CBA in the Third Party Home Loans Sales Team (in English - loans sent to the Bank via a Mortgage Broker). I act as the Liaison between the Broker and the Bank for any product/processing enquires, as well as escalating urgent matters etc for finance/settlement approvals. [I][U]Any information i provide is of personal opinion only and will not apply in everyone's case, ie different product suit different people, its all about personal preference.[/U][/I]

My advice is as follows:

First question is if you hold a Wealth (CBA direct package) or MAV (broker introduced package). As this will change what fees etc you will be charged for either topping up your existing loan or opening a brand new Line of Credit

Personally i prefer the LOC idea (I have one myself for my car), as you can have your pay go directly into it and use it as your daily transactional account and have your home loan directly debiting from there also. That way everytime you get paid you're effectively reducing your overall loan balance, therefore paying less interest every month.

To be perfectly honest the only benefit of topping up your home loan is that the interest rate (assuming you have a Standard Variable Rate home loan) is always going to be 0.1% lower than a LOC will be. However with the LOC i find that being able to use it as your day to day account and your pay going directly into it etc is better than 0.1% less interest (escpecially only on $30K) [COLOR="Red"]- remebember this answer is only CBA specific, not sure about other banks/credit societies....[/COLOR]

Like i said give me call (pm for my number) if you want and i can look into it a little further if you are unsure of what product you currently hold etc.

Or if you prefer just give your Mortgage Broker a call and have a quick discussion with him/her if you want, im sure they would love to help.

Who knows if you speak to your broker and there might even be a better option out there other than CBA. Just beware if you do find a better product elsewhere and you decide to close your current home loan, if you have held it for less than 4 years you will be up for a $700 deferred establishment fee, as well as discharge fee's etc. Just weigh up the pro's and cons of each product and make your decision that way.

Flick me an email at [email]sam.zurzolo@cba.com.au[/email] if you want to know anything more, or if it's easier you can just PM me on here. Hopefully i have been some help at least

Cheers

Sam

[QUOTE=BLUES;499527]Re-draw your existing loan?[/QUOTE]

its abit hard to do that for me because my home loan is actually spread over 4 loans. incurring $50 each redraw, plus my redraw isnt up high enough for what i need.

[QUOTE=REXXXED;499532][B]**information edited so as not to be specific to the above member's case**[/B]

I work for the CBA in the Third Party Home Loans Sales Team (in English - loans sent to the Bank via a Mortgage Broker). I act as the Liaison between the Broker and the Bank for any product/processing enquires, as well as escalating urgent matters etc for finance/settlement approvals. [I][U]Any information i provide is of personal opinion only and will not apply in everyone's case, ie different product suit different people, its all about personal preference.[/U][/I]

My advice is as follows:

First question is if you hold a Wealth (CBA direct package) or MAV (broker introduced package). As this will change what fees etc you will be charged for either topping up your existing loan or opening a brand new Line of Credit

Personally i prefer the LOC idea (I have one myself for my car), as you can have your pay go directly into it and use it as your daily transactional account and have your home loan directly debiting from there also. That way everytime you get paid you're effectively reducing your overall loan balance, therefore paying less interest every month.

To be perfectly honest the only benefit of topping up your home loan is that the interest rate (assuming you have a Standard Variable Rate home loan) is always going to be 0.1% lower than a LOC will be. However with the LOC i find that being able to use it as your day to day account and your pay going directly into it etc is better than 0.1% less interest (escpecially only on $30K) [COLOR="Red"]- remebember this answer is only CBA specific, not sure about other banks/credit societies....[/COLOR]

Like i said give me call (pm for my number) if you want and i can look into it a little further if you are unsure of what product you currently hold etc.

Or if you prefer just give your Mortgage Broker a call and have a quick discussion with him/her if you want, im sure they would love to help.

Who knows if you speak to your broker and there might even be a better option out there other than CBA. Just beware if you do find a better product elsewhere and you decide to close your current home loan, if you have held it for less than 4 years you will be up for a $700 deferred establishment fee, as well as discharge fee's etc. Just weigh up the pro's and cons of each product and make your decision that way.

Flick me an email at [email]sam.zurzolo@cba.com.au[/email] if you want to know anything more, or if it's easier you can just PM me on here. Hopefully i have been some help at least

Cheers

Sam[/QUOTE]

A good reply in my book with sound advice. Well done.

[QUOTE=REXXXED;499532][B]**information edited so as not to be specific to the above member's case**[/B]

I work for the CBA in the Third Party Home Loans Sales Team (in English - loans sent to the Bank via a Mortgage Broker). I act as the Liaison between the Broker and the Bank for any product/processing enquires, as well as escalating urgent matters etc for finance/settlement approvals. [I][U]Any information i provide is of personal opinion only and will not apply in everyone's case, ie different product suit different people, its all about personal preference.[/U][/I]

My advice is as follows:

First question is if you hold a Wealth (CBA direct package) or MAV (broker introduced package). As this will change what fees etc you will be charged for either topping up your existing loan or opening a brand new Line of Credit

Personally i prefer the LOC idea (I have one myself for my car), as you can have your pay go directly into it and use it as your daily transactional account and have your home loan directly debiting from there also. That way everytime you get paid you're effectively reducing your overall loan balance, therefore paying less interest every month.

To be perfectly honest the only benefit of topping up your home loan is that the interest rate (assuming you have a Standard Variable Rate home loan) is always going to be 0.1% lower than a LOC will be. However with the LOC i find that being able to use it as your day to day account and your pay going directly into it etc is better than 0.1% less interest (escpecially only on $30K) [COLOR="Red"]- remebember this answer is only CBA specific, not sure about other banks/credit societies....[/COLOR]

Like i said give me call (pm for my number) if you want and i can look into it a little further if you are unsure of what product you currently hold etc.

Or if you prefer just give your Mortgage Broker a call and have a quick discussion with him/her if you want, im sure they would love to help.

Who knows if you speak to your broker and there might even be a better option out there other than CBA. Just beware if you do find a better product elsewhere and you decide to close your current home loan, if you have held it for less than 4 years you will be up for a $700 deferred establishment fee, as well as discharge fee's etc. Just weigh up the pro's and cons of each product and make your decision that way.

Flick me an email at [email]sam.zurzolo@cba.com.au[/email] if you want to know anything more, or if it's easier you can just PM me on here. Hopefully i have been some help at least

Cheers

Sam[/QUOTE]

Nice answer Sam
Would you like a job? :)

Anyway the way I see it is if you are going to use the whole 30k limit in one hit, it may be better to go a normal HL, then concentrate on paying it down as usual.

If the funds have multiple purposes over a longer period of time, a LOC offers more transactional flexibility. (kinda like a big credit card)

As Sam mentioned, it's a personal choice which your Broker will help after investigating your financial goals (alas, he won't get paid a cent for it due to CBA's commission structure!)

im kinda leaning towards extending my loan, seems the way to go, i bank with westpac but my home loan is through cba, opening another account for a LOC will just create another account to manage, and i wont be using it as a daily account/depositng my salary into it.

Where do you/ what do you do for work easytiger? I assume a broker or something along these lines if you know our commission structure?

[QUOTE=REXXXED;499903]Where do you/ what do you do for work easytiger? I assume a broker or something along these lines if you know our commission structure?[/QUOTE]

Yeah, I'm the BDM for Crystal Finance agg thru PLAN

Make's perfect sense then!

IMHO unless you are super disciplined dont go near a LOC. i.e. Because the limit never reduces (as opposed to a normal home loan) the temptation to keep redrawing and spending the money is massive. i.e. in 10 years you will still owe the same amount.

LOC are great for business overdrafts and things like that where there is a lot of money coming and going but for a normal person on wages they are danger.

My 2C

Brendon

[QUOTE=urabus;499931]IMHO unless you are super disciplined dont go near a LOC. i.e. Because the limit never reduces (as opposed to a normal home loan) the temptation to keep redrawing and spending the money is massive. i.e. in 10 years you will still owe the same amount.

LOC are great for business overdrafts and things like that where there is a lot of money coming and going but for a normal person on wages they are danger.

My 2C

Brendon[/QUOTE]

Yeah LOC's are good to use as an operating/buffer account and suit the self employed or people who get paid monthly or non regular commission etc

As an evergreen product (limit is maintained) and the potential to let the interest capitalise without making repayments*, it requires a bit of discipline as you say.

How are you with your credit cards?

*CBA for example have begun to request some form of minimum repayment contributions to LOC's since Jan this year

whs^^ you will get a lovely letter in the mail asking why no money has been going into your LOC recently....

I like the advantage of not having to worry about my other loans, having all the repayments for my other loans coming out of the LOC, then just concentrate on getting the LOC amount as low as humanly possible!

But then if something come's up out of the blue....like my Landrover engine cracking a head and i need access to some funds to order a new engine from Adelaide for instance, i can do so without needing to apply for more cashola.

A LOC is no good unless you are disciplined! The temptation is too strong if the funds are available!

Now if you are disciplined they can be great! Treat it like a car loan with high repayments and you will be miles ahead. No car loan will ever match that of a LOC on ya home loan but the key is to pay it off quickly and close the LOC once it is completley paid off but in the event you need to repair your car for some reason or other then the funds are available. GL

Personally I don't see why you want to end up in perpeptual debt with mortgages/lines of credits/car loans/credit cards buying things that you can't afford.

Sure get a loan for massive purchases (house) or when you have some tax effective accounting helping you offset the interest for a benefit... But I'd rather plow the cash into paying off a home loan and drive a cheaper car, than have a decent car and be a slave to the banks and interest rates.

But if you have to do it, I would take Brendon's advice on board. Lot's of people see a line of credit as free money after a few years and end up shit creek without a paddle.

Just make sure you marry a good accountant.

[QUOTE=EXPLICIT;499987]Just make sure you marry a good accountant.[/QUOTE]

old mans an accountant, a very good one at that, worked for michael wright and his sister. so thats no probs

i had a LOC for around $30,000 because at the time i wasn't in front enough to redraw and the house hadn't increased in value enough either. in hindsight i shouldn't have done it but at the time it seemed like a good idea. can work well for some people but as others have stated, the temptation to keep spending it is huge! mine never reduced! after a couple of years, more collaterall built up etc, i consolidated the two ( mortgage and LOC ) into one morgage amount. was a lot easier to manage. in a different position now but i personally wouldn't do an LOC again.

[QUOTE=ITGRIPS;500056]. can work well for some people but as others have stated, the temptation to keep spending it is huge! mine never reduced! after a couple of years, more collaterall built up etc, i consolidated the two ( mortgage and LOC ) into one morgage amount. was a lot easier to manage. in a different position now but i personally wouldn't do an LOC again.[/QUOTE]

The big mistake people make is that they think it is their money. Same as a credit card. It is NOT your money!

You were smart enough to realise you were never going to get rid of it and consolidate.

Brendon

Consider a Personal Loan. It may be higher interest but it forces you to pay it off quickly and will be cheaper if you do pay it off in 3-5 years than holding a lower interest debt for 30 years.

I work for a bank, although no longer involved directly in banking, and thats how I'd go.