Recommended Savings Account

[investorak]

Im risk adverse so what i want to do is have some money with a bank that i dont have any mortgages with just incase banks recall my revolving accounts.

Can anyone recommend any particular bank or savings account?

PS: The banks i currently have mortgages with dont have offset accounts, just revolving accounts.Interest rates will be lower in a savings account than having it in a revolving account against a mortgage but would prefer to sleep at night

[Anthonyacat]

You're crazy. No sense at all in this. Flip the logic on its head, and you're effectively borrowing money on a mortgage, to invest in a savings account. Does that make any sense to you?

If you're really big on this idea though, the ANZ Serious Saver is the best savings account I could find when I was last looking. But you probably have a mortgage with them already. Use Rabobank; they were miles ahead when I last used them in 2008, and they don't offer mortgages.

Alternatively, and I'm being quite serious here, send it to me. Unless you're talking hundreds of thousands I'm quite happy to take your money and pay you interest, more than any of the banks will offer. Then again, your risk aversion might prevent that. PM me for details if it sparks your interest though.

[Nick G]

How much are we talking here?

[investorak]

How much are we talking here?

Was thinking 30-50k

[investorak]

Anthony what happens if your revolving accounts are removed? Maybe your house hold incomes are down to one.

Its some insurance

Does anyone else do what im thinking of doing?

[Anthonyacat]

Anthony what happens if your revolving accounts are removed? Maybe your house hold incomes are down to one.

Its some insurance

Does anyone else do what im thinking of doing?

If that were to happen, and someone needed money back, I'd have to liquidate some shares, or borrow from a friend, family, other lender, etc. But that then becomes my risk, not that of the person lending to me. And I'm happy enough with risk to take that one. It's also why I wouldn't take more than $120k or so from any one person.

I am sure lots of people do what you're suggesting, but few would do so with professional advice. On $50k, the difference between a 5% mortgage and a 3% PremiumSaver from Rabo is $1k per year. That's more than the insurance on some houses.

[Tjc]

Anthony what happens if your revolving accounts are removed? Maybe your house hold incomes are down to one.

Its some insurance

Does anyone else do what im thinking of doing?

I just use actual insurance for that scenario, income protection insurance infact.

also what do you mean by "recall revolving credit accounts"? As in

1: "sorry we're calling in the RC, you'll have to pay off some of your mortgage with it and there by saving you interest"

2: "sorry we're calling in the RC, you'll have to fix that portion of your mortgage and there by saving you interest"

3: "sorry we're calling in the RC, you'll have to move to a regular floating rate, your money will be moved to a regular savings account like your original plan except you saved more interest for the entire duration you didn't follow through with it"

4: "sorry we're calling in the RC, you'll... actually we're stealing all your money straight out of your account and funnelling is into ours never to be seen again"

None of of these options seem catastrophic apart from number 4, even then id be much more concerned about the (I presume) substantially larger mortgage that's attached to the Building where you sleep at night that they hold security over and what they plan to do with that if they can so easily just take your money away from you.

[Bobsyouruncle]

Whilst it is a very unlikely scenario it can happen Tjc. Early in the GFC when the banks realised how much lending some of us had, and before we had defaulted on any loans, they came calling, fine print in hand, saying between the 3 banks we own you have over 2 mil in lending, we need that under 1 mil in 60 days. Froze RC accounts etc.
So it can and does happen....

[Anthonyacat]

Absolutely can happen. It's amazing what's in the fine print.

I think the OP was worried about the bank effectively closing their RC account that has money in it.

IE, a 100k revolving credit account with $102k available money inside it, so it doesn't charge you interest. Suddenly the bank says you don't have the RC anymore, and you're down to $2k available. They're not 'stealing your money', they're telling you that you can't use theirs anymore. I see this as a possible but not probable event. Admittedly more likely now that we've seen banks go overboard with the LVR rules.

[Bobsyouruncle]

Right yes I get you. I think it can happen for sure but most unlikely. Mind you who would have thought in 2005 that 67 finance companies would fail in New Zealand in the next 6 years. ANYTHING is possible.

[Perry]

Try a Credit Union or TSB. They have some good rates for on-call, online savings accounts. And they are at least for now - not connected with the big banks, except for transaction processing.

[Lanthanide]

Move your mortgages to a bank that offers Offset mortgages, instead of revolving credit.

BNZ, Kiwibank and I believe Westpac offer these. ANZ doesn't.

For property investment purposes you don't want a revolving loan anyway, because of the way IRD treats it. If you're $20,000 in debt on the RC mortgage, and your pay comes in, so it goes down to $16,000 in debt and IRD will declare that you have paid off 4,000 of the debt, then you pay your power bill for the month which costs $300 then you're $16,300 in debt. But now IRD says that the $300 of that lending was to pay for a power bill, not to pay for your investment property, and so the interest on that $300 is no longer tax deductible. Then you pay off your credit card, which is $2,000, and you're back up to $18,300 in debt, but only $16,000 of that was for the purposes of your investment property. Rinse and repeat.

It then becomes a nightmare to calculate exactly how much interest you can claim as a tax deductible expense, and within 2-3 years you can easily have cycled through your entire borrowing in the RC account, leaving you with a mortgage that you can no longer claim tax deductions on, because IRD says the purpose of the lending wasn't for your investment property; it was to pay off your household bills etc.

Offset mortgages, however, don't have this problem, because the mortgage itself is not paid down or reduced any more quickly; the bank is simply charging you less interest on your loan by using your savings offset.

This avoids the entire RC risk you are talking about. The only risk that remains is if the bank decides to recall part of your loan (GFC as others have mentioned above, for example), and say "hey, it seems like you've got $40k cash sitting in your savings account, we think we'd like you to pay back an extra $35k of your loan by the end of this month. Thanks". They can make those sorts of demands anyway, but seeing the cash sitting in your account probably makes it more likely they would do this (low hanging fruit).

[Tjc]

Whilst it is a very unlikely scenario it can happen Tjc. Early in the GFC when the banks realised how much lending some of us had, and before we had defaulted on any loans, they came calling, fine print in hand, saying between the 3 banks we own you have over 2 mil in lending, we need that under 1 mil in 60 days. Froze RC accounts etc.
So it can and does happen....

Oh I'm under no illusion that this situation has happened before but if it gets to the point where a bank is seizing the money in your account wouldn't you already be well on the way to having your house sold out from underneath you etc? Even if you did move your money before this happened wouldn't the bank just force you into bankruptcy through the courts and you would have that money seized from you regardless which bank or investment you placed it in to?

[Wayne]

Move your mortgages to a bank that offers Offset mortgages, instead of revolving credit.

BNZ, Kiwibank and I believe Westpac offer these. ANZ doesn't.

For property investment purposes you don't want a revolving loan anyway, because of the way IRD treats it. If you're $20,000 in debt on the RC mortgage, and your pay comes in, so it goes down to $16,000 in debt and IRD will declare that you have paid off 4,000 of the debt, then you pay your power bill for the month which costs $300 then you're $16,300 in debt. But now IRD says that the $300 of that lending was to pay for a power bill, not to pay for your investment property, and so the interest on that $300 is no longer tax deductible. Then you pay off your credit card, which is $2,000, and you're back up to $18,300 in debt, but only $16,000 of that was for the purposes of your investment property. Rinse and repeat..

Though I wouldn't advocate mixing personal and business expense in this way is this how the IRD HAS to view it?
The $4k pay could be seen as a shareholder advance putting the Shareholder Current Account $4k further in credit.
The withdrawal of the $300 would then be a reduction in the shareholder current account.
It is quite legitimate to increase the company's (and I now realise I have assumed a company structure) borrowing to pay back the shareholder current account.
So the question now is - what is the structure we are talking about?

[Bobsyouruncle]

Oh I'm under no illusion that this situation has happened before but if it gets to the point where a bank is seizing the money in your account wouldn't you already be well on the way to having your house sold out from underneath you etc? Even if you did move your money before this happened wouldn't the bank just force you into bankruptcy through the courts and you would have that money seized from you regardless which bank or investment you placed it in to?

No not at all. As I already said in the GFC they did this before we had missed a payment. For example the banks get legislated to maximum lending of 2 million dollars per real person hiding behind entities. (I know that is crazy but just an example). So they exercise their right to recall a loan early for any reason and start doing it. They cancel all RC's and go after the debt reduction. Can in theory happen overnight!