Just wondering, would we be able to reduce our repayments on our PPOR, if we linked it to an offset account with a decent amount of mney in it or is the only way you can reduce your r/p's by putting money directly into the loan (into redraw)?
Thanks!Mortgage HunterParticipant@mortgage-hunterJoin Date: 2003Post Count: 3,781
Yes you can if your loan is Interest Only.
If it is a P&I loan then neither offset or redraw will reduce your payment as they have a set weekly payment.
You will however reduce the amount of interest paid so your fixed payment will reduce your principal more than normal and hence shorten your loan term.
Hope this helps.
Would it be possible to put a chunk of money into our PPOR loan and then refinance it, to reduce the repayments? We just need to be able to pay less until I return to work in Jan 08, then we can start paying a higher amount again.
Thanks.amerc79Participant@amerc79Join Date: 2005Post Count: 29
The only way to reduce your repayment is by changing to I/O or to use the funds to have a Principal Reduction, therefore reducing your loan amount.
Another option is if the funds are placed on redraw you are still required to make the payment, however the interest you are incurring is reduced by the amount in redraw and you can end up making savings in your interest costs.amerc79Participant@amerc79Join Date: 2005Post Count: 29
You can also with some lenders place the money on redraw and make the payments that are comfortable for you while accessing some of your redraw to assist in meeting your monthly payment. Therefore, reducing your redraw, but still making considerable savings on interest costs.
This may affect your ability to refinance at a later date though.
I just thought of a very easy solution to my problem, it's so simple I can't believe I didn't think of it before LOL. I'm blaming the nappy brain!!
With the profits from the IP sale, I will just take out $10k to cover mortage repayments for 8 months (or until I go back to work) and then the rest of the profits into the loan…. EASY!elkamMember@elkamJoin Date: 2006Post Count: 722
Or better still put all of it into a 100% offset account against your loan and just pay the mortgage out of this offset account.
You can stay home with your baby for as long as you like.
All the profit from your IP sale will be being used to reduce the interest on your house loan.
You retain the flexibility to use this profit later to buy another PPOR and all the current loan becomes tax deductible when your current home becomes an IP (as discussed in your other thread).
Elka, thankyou. I always understand your posts, they make sense
I don't know why I didn't just think of that before. Continuing our current repayment amount, using money from the sale. I don't know why I had it stuck in my head that I somehow had to reduce our set P&I repayment amount LOL, derrrr!
I have to look into how much it would cost to change our loan to one with an offset facility (100% preferably), and what the interest rate would be on that new loan, the fees to change the loan over, etc. We're currently with Bankwest and the interest rate is 7.40%.
I do think it's the way to go though, even though after talking with hubby the other night we're not sure now that we would turn our current PPOR into an IP one day. But at least if we do it this way, we have the option. It would also suit us really well to have access to the profits in the offset account (therefore not having to pay a redraw fee each time) as we are still completing renovations (and spending thousands) on our PPOR, though we're almost done!
"You can stay home with your baby for as long as you like."
Ooohh, as wonderful and tempting as that sounds, wouldn't we get too far behind (financially)?
Thankyou again Elka, for pointing out the obvious to me!