Forum Replies Created
- Terryw wrote:You should not be paying off the house but keeping your cash for future possible PPOR loans. A good way to do this to save interest is to use a 100% offset. Paying into the loan and redrawing will make you pay more tax so don''t do that. No need to worry about selling yet.
Why does it matter?The loan from the PPOR is not tax deductable anyway, I dont get why putting it in an offset benefits them.
If it is their PPOR, after 6 years they will not be able to able to claim deductions anyway. Say in 7 years time they want to buy an investment property, they can take out a new loan with an offset account and then redraw on the PPOR loan and put it into the the new investment property loans offset account. The PPOR place is not tax deductible anyway so drawing money out has no impact because it never was tax deductable anyway.I dont get why it matters so much? Or does it matter if they decide the PPOR might actually be used as their IP?
Shape wrote:Mr and Mrs Propertyinvesting lives at home and has a IP worth $300,000, they plan on buying a PPOR to live in very soon + get married and buy some shares. 1. Redraw—- You have a $200,000 Investment property Mortgage with $50,000 cash you decide to chuck this cash into the mortgage…so the mortgage is now $150,000 ( + 50,000 redraw) – you pay % on the $150,000 and the % is all fully tax deducible …2 years later… You find your PPOR and decide to redraw the $30,000 out for deposit towards the PPOR —- your initial mortgage is NOW $180,000 BUT only 83% is tax deducible ( 150/180) SO now when it comes to tax time you need to work out the % for every split and every % repayment. Might sound simple…but lets add the MARRIAGE cost into this + cost to buy shares??? ( some tax deducible so not) — WILL GET MESSY 2. Offset– SAME EXAMPLE. $200,000 Mortgage with $50,000 Cash in the offset account…you still only pay % on the $150,000…but the "mortgage" amount does not change it remains at $200k. When you use the funds from the offset account it does NOT affect the mortgage "amount" and the tax deducibilty remains intact.But they could get of this problem realtively easy though couldnt they?
For example, in 2 years should they want to spend the 50k on a car or pay off the loan for the principle place of residence, couldnt they just refinance and essentially "clean up" any contamination. By this I mean, take out their 50k (spend it), get a new 200k loan with an offset account? Now the full 200k can be used for deductions. I understand it can be a hassle but if you have a redraw its not the end of the world, you can still clean up any contamination by refinancing (assuming you can still get that amount of debt and banks still have same appetite).
I understand previously this may have been difficult with refinancing costs but given that its relatively easy to refinance, its not that much of an issue is it if you were to get a redraw. Or is it? Essentially, my question is, you can fix the issue by just refinancing.EPI_Den wrote:I'm with Commonwealth Bank and I recently negotiated a further decrease on my loan. I'm now on 6.61% which I think is 1.14% below their standard variable rates. I'm happy with this but it's not out of the question to fix part of it if I see a really good deal!
DenHow did you negotiate this? Do you have significant amount of debt with them and high income?
Shape wrote:—Note—- How you tell if your account is an offset or redraw, it will say when you go online and go to "more information/ accounts details" the page where it tells you your % and "years" left…if it doesn't say Offset then you most likely don't have one…for a re-draw it won't say anything because Most account have an redraw. NAB- it's on the statement on the right hand side ( it should say 100% offset Choice package) CBA- they call it a MISA account (also the misa is slightly difference to the traditional offset accounts…) Westpac- Rocket Most offset are part of a package only, in which you have a ongoing fee. But note EVEN if you are on a package this does not mean you have an offset account, as you need to request for this offset account. Regards MichaelCheers thanks alot for you help I really really appreciate it.
Regarding how do I know if my account is an offset, I have just been given the loan documentation from CBA. I cant see anywhere wheter I have an offset account and I dont really want to have this loan set up then find out I dont have one. The way you suggested requires me to have the loan setup then log in to find out if I have one.
Maybe I should ask if it will have a MISA account aswell?
the lending manager said to me offset and redraw accounts are the same thing
a redraw account offsets the loan account.
I am bit confused, how do I know if my loan is a offset or redraw where is it documented?
So essentially offset and redraw are the same thing but an offset provides more advantagers. So why would anyone go for a redraw as opposed to an offset? I am thinking fees might be the reason?
What is a redraw account then?
I just read that blog entry sounds like my account is an offset.
no restrcitions and is a full featured loan, only limit is can only pull out minimum of $500 from offset account. I get no charge on pulling out of offset account either.
What is everyone getting now?
I just applied for a $700k variable offset loan account.
I think they said I could get 6.79%, shoudl I shop around? ps thats with westpac
can you place a charge over the title? for example, 2nd ranking mortgage or caveat?
To me this seems like a big risk of buying a strata title, you are essentially taking on the credit risk of other individuals.
In some apartment blocks almost 60 people and there is no real incentive for investors to pay this in a falling market should loan value > property price.
ohk so then you would have to proportion that period out?
Yeh but what if I sold property B 3 years down the track?
Doesnt that mean, I could sell one. Then, move into the other one, then that becomes my PPR and then I can also get benefit on that place once I sell?
Or can a person only claim one CGT exemption in their life?
So essentially, if someone has a property of 10 , they could essentially move in to the property when they first buy it and then they can decide which property to sell based on highest gain?
body corporate manager sourced 3 companies, based on building val.
Took middle ranged one as it had $20mil pub liability.
So if I was to not get public liability for my own property, does that mean if my tenant was to sue me I could lose my house?
It cant be right that it is so easy to transfer property.
All you have to do is fill out the T1 form and get the owner to sign and bang its been transferred.
Why is it so easy?
It just means its so easy for vulnerable trusting family members to sign documents if someone they trust brings them form to sign.
Is it this easy to transfer a property, just a signature?
I am in Victoria
so what if i let out my principle place of residence for say 5 weeks.
Can I charge my tenants for water usage eventhough our meter is shared?
This states otherwise
http://www.echoice.com.au/mortgage/home_loans?pn=/info/home_loan_types/offset_account.htmlInterest you make offset by interest you pay
Therefore, bank could essentialy make a "margin"
Ok so essentially the offset account acts as a reduction to the principle amount. So in effect if that happens there is no difference between a P&I and I loan should you do same monthly principle reductions every month.
I don’t get the purpose of the offset account then. Why can’t they just reduce the principle loan amount?
Does the amount the offset account reduces from the principle charge a different interest rate? If not, why do they even need an offset account, why can’t the bank just reduce the principle balance of the loan?
Den
