Hello,
I had a similar query but I want to do something slightly different. The option I want to consider hasn't been covered in this thread so I wanted to ask.
I have a variable rate home loan. I would like to lodge a lump sum into the mortgage account but NOT pay this off the capital (as I would like access to this money at some point). I want to keep my monthly payments the same. From what I understand, most banks calculate the interest using the "end-of-day" balance on the mortgage account therefore a lump sum sitting in the account would "offset" the loan capital and since the payments are the same the loan capital would reduce more quickly.
For example:
- lets say my homeloan is 100K
- lets say pay 5% mortgage meaning I pay 800 monthly (e.g. 400 interest and 400 capital)
- lets say I lodge 40K into the mortgage account (dont pay off the capital)
- now the end of day balance is 100k-40K=60K (interest is less)
- the payments stay the same and therefore more capital gets paid from my monthly payment
- I can ask for this 40K back out of the account at a later time
- The whole time my agreed monthly payments stay the same.
I know that this is technically possible and the banks do not like this. But technically I understand they cant stop it
Has anyone done something similar? Are there some basic questions I can ask the bank so that I can confirm this is possible (without telling them the whole plan)? For example, should I ask them:
- Is the interest calculated on end of day balance on the mortgage account?
- Can lodge in advanced my payments and still continue to make monthly payments?
- How does that effect the loan balance?
- Will the balance be accessible to withdraw later?
Thanks in advance and sorry for the long post - I just wanted to provide as much clarity to my question as possible.
Bovis