Finance

I paid a visit to my local Belconnen shopping centre. I was in search of a Westpac bank, for no other reason than because the house in Warrandyte was financed though Westpac and I thought it might have made the finance easier to organise. With the auction coming up very shortly, I thought this might be a prudent measure. That’s an understatement. Had I any idea I would have been attending an auction I would have done this earlier; a lot earlier. It’s not a good idea to leave finances until the last moment, like me.

In auction sales you generally have to put up 10% of the selling price at the fall of the hammer. When I was looking through the Macgregor property the agent had mentioned the availability of a bond guarantee that can be used to cover the deposit. I’d never heard of this. Apparently, this method is commonly used, particularly in the eastern states, and used in some states more than others. It is used in place of a cash or cheque deposit. It sounded interesting. So, I enquired about it with the Westpac loans manager. He said he was familiar with the service and would be happy to arrange it for me. I also earlier expressed my interest in the property with the agent and whether a 5% deposit would suffice. He said yes, which was good.

There seemed to be a lot of fees required for home loans this time around, that I don’t recall from my previous experience. Perhaps I’d just forgotten. I seem to suppress the worst issues. The Westpac loans officer also made reference to a draw down facility that can be built into a home loan from the loan’s inception. Westpac had made reference to an offset account some years ago when they were financing my Warrandyte property, but I didn’t like it; in fact it seemed like a waste of money in the way it was structured. In so far as I recall, you deposited your spare cash in the loan offset, and the interest generated was deducted from the loan. The exact details escape me, but it seemed pointless. It quickly occurred to me that if you have spare cash, make extra payments to reduce the principal. Anyway, this new arrangement was different and seemed okay to me. You borrow more than you need for the purchase with the difference remaining in the offset and available as cash whenever you needed it, you make repayments against the borrowed amount, but interest is calculated on the outstanding amount minus anything that’s in the offset.

I explained my interest in the Macgregor property to the loans manager, and I explained my situation in having a buyer for my Warrandyte property. I put to him the question of the possibility of being able to purchase the Macgregor property. And his response: yes, it could be done. It would require the bank needing the title of the Warrandyte property for the duration of a bridging loan. That would involve some set up fees ($200 - $500 based on the value of the property), then there would be about $680 in interest, and $750 establishment fee. All this just to cover a period of 10 days when technically I would own two properties.

I suggested we attempt to match the settlement dates. Matching the settlement dates would avoid the need for a bridging loan. He said that would be good. I wonder why he didn’t offer this suggestion himself.