I am going to build my first PPOR and paying 80% of the loan (No mortgage Insurance). I have about $20K of saving that will be used for finishing the house in the next 1.5 year.
Should i go for Homeloan with offset account or Basic loan that has redraw facility?
Because i notice that for homeloan with offset account has higher rate about 0.3-0.5% higher than Basic homeloan.
Does Redrawing almost the same as Offset except there is a redrawing fee?Thanks
Since it is an owner occupied home, from a taxation POV then there shouldn’t be any difference. However if you were going to move out and rent this place at a later date, then an IO loan with an offset account would be much better – this enables you to keep the loan high while reducing interest by puttin geverything into the offset account.
Most lenders charge a fee for redraw, but this shouldn’t matter too much if you only intend to redraw a few times.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terryw,
I think i have decided to take a Homeloan with offset account as it’s more flexible.
It all comes down to how many times you plan to redraw I guess. Sit down and work out the break even point on cost of redraws vs planned offset balance and interest rate difference.
Personally I run with an offset account, but make sure the offset account doesnt carry fees also as some do and that will alter the equation also.
Cheers
Matt
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