advice needed with bank fees

hi all,
i am looking for some advice here, i have a recent first home and an offset account attached with it.all my salary goes in it and offsets the interest.i intend to make some extra repayments( probably $50-100 extra per month).
the question is this offset account has a monthly fee of $ 8.00 which i think is too high. i am wondering if its worth it to keep this account or get rid of it and make extra repayments every month.
i would be delighted if somebody could point me in the right direction please.
thank you all for your time and help
harry

hi coolharry,

The first question I would ask you is whether or not there is any chance you might rent the house out at some point. If so, keep the offset account as you need to preserve the balance of the loan in case you change the PPOR to an IP and need the cash to buy another IP.

This way you will have more cash available for the new PPOR purchase, and the IP will still have a fully deductible loan.

Hope this helps.

Regards,
YI

"Knowledge is Power"

Hi Harry,

No matter whether you have the offset or deposit your funds (and then redraw) into the Loan directly, the balance of your loan will still decrease at the same rate (assuming you are making principal and interest repayments).

If you are happy to have your pay deposited directly into the loan and then manually transfer money out every time you need it then you can do it that way and save yourself $96 a year and pay pretty much the same amount of interest as you would with your offset account.

I guess you just have to weigh up whether that minor inconvenience is worth it to save $96 a year?

Hope this helps! Good luck.

Kind Regards,

Matt.

Rather being concerned about the monthly fee i would be asking yourself why you are looking at making extra repayments.

Why wouldnt you convert the loan to interest only and retain the offset account fee and all.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Matt, be aware that some banks and loans charge a fee every time you redraw from it. i know the original loan that I ahd with ANZ charged $25.00 every time you wanted to redraw money, three times as much as the $8.oo per month of this offset account.

cheers

Sonya

Great point Sonya - please make sure you don't have any redraw fees on your loan!

thank you all for your replies. i greatly appreciate it.
harry