All Topics / Finance / living off credit cards and putting all our wages on our loan?

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  • Profile photo of PASSNBYPASSNBY
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    @passnby
    Join Date: 2007
    Post Count: 20

    I remember when Aussie came over to re-finace us with rams (now RHG GRRR) and she was telling me about living off our credit cars and putting our wages on our home loan, then when the bill comes once a month take the money out of our morgage and pay off the credit card, she said by doing this we can save thousands and years off or loan, is this true? and whats it called?

    Profile photo of keikokeiko
    Participant
    @keiko
    Join Date: 2008
    Post Count: 513

    Maybe line of credit, But you wana be a good saver or you don't want to do it. if you start buying everything on your credit card you will probaly go overboard if you are not a hard saver you might fined in 6 months or so the bank comes and takes your house away

    Profile photo of Event HorizonEvent Horizon
    Member
    @event-horizon
    Join Date: 2008
    Post Count: 90

    yes this is a good idea and yes you will save on interest

    There a differeent ways to do this.  What you mention is a loan with a redraw facility but you can also have a loan with an offset account.

    Your solution depends on your current loan type and what it allows you do and for what cost. My advise is speak to your lender

    however..

    My preference is to have a Loan with an offset account linked to the loan account and pay all the salary into that, with most purchased paid by credit card which in turn is payed off automatically at the end of each month avoiding credit card interest but saving loan interest.  This saves you money becuase the money in the offest account is "offset" agains the mortgage and therefore you only pay interest on your loan balance minus the amount in the offset account. For example say you have 300K loan and 40k savings you therefore pay interest on $260K not $300K

    I prefer the offset acount option on my home (offsetting an interest only loan) rather than using a redraw facility on a principal and interest mortgage becuase it allows more flexiblilty should I there be changes to a property structure but gives the same interest saving benifits as well as other advantages. Say for example you go interstate/overseas and want to rent your home, in the above structure you can gear the loan against the original loan amount and not the reduced amount.  it also allows a larger buffer zone if things get tight but  it allows you more buying power and leverage should you wish to buy other investment property in the future. I would however only recommend paying interest only on your home PPOR if you are diciplined savers and are infact saving the same or more than the equivelant princpal and interest repayments 

    Hope this helps

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    If you call it mortgage elimination some firm will charge you $3000 for arranging it for you.

    Call it loan restucturing and I do it for nothing for clients.

    Personally i wouldnt use a Line of Credit but an offset account and an interest only loan.

    All in all it is the same interest rate savings but has more flexibilility.

    If your lender charges interest on a the daily balance although debits the account on a monthly rest then certainly it wll save you interest and years off your home loan. 

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of grasshopperinvestorgrasshopperinvestor
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    @grasshopperinvestor
    Join Date: 2008
    Post Count: 12

    She might of set up a mortgage off set account for you ( its usually set up against a P&I Loan) . I have one as long as you only use your card for your usual expenses ( your budget ) and pay your monthly bill it should be fine . It can also help you keep track of your spending . I'm only a newbie at all of this……. so i hope that helps

    Profile photo of PASSNBYPASSNBY
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    @passnby
    Join Date: 2007
    Post Count: 20

    AHA! offset, thats the one! we are very good on spending within our budget (g/f is 100% spot on with bills etc etc) Now, is it the more savings I have the less I pay ? my loan is $224,000 and about $5000 savings, so does that mean im only paying intrest on $219,000? This loan is my house, not a IP, so therefor I should pay Intrest and Principle and not just intrest?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    If you have a 100% offset account you can save interest by keeping money in this account. Each day your money is in there, the more you save. The idea is to use the credit card with an interest free period so that the money you would have used to pay for groceries etc stays in the account longer saving you interest. You then pay the credit card off in a lump sum at the end of the month before you will accrue interest. If you save interest in one month, then the next month you will be saving interest on interest, with the effect increasing over time.

    But, you must be disciplined. If you forget to, or cannot, pay off the amount owing on the credit card in full, then you will be charged much higher interest.

    You can also get points and bonuses with some credit cards. I use Westpac's Altitude card and get Myer gift cards with my points.

    If you have a few investment properties you can save a fair bit and get heaps of points too by paying for rates, insurances etc (don't let the agents pay them on your behalf).

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of PASSNBYPASSNBY
    Member
    @passnby
    Join Date: 2007
    Post Count: 20

    So can you get a offset account on a fixed loan? and with RHG?

    Profile photo of ducksterduckster
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    @duckster
    Join Date: 2004
    Post Count: 1,674

    I've wondered myself if it would be cheeky  to then transfer the credit card balance to another bank on one of those low 18 month intersest rates of 2.9% I have seen advertised.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    PASSNBY wrote:
    So can you get a offset account on a fixed loan? and with RHG?

    Haven't checked lately, but RHG didn't offer any offset accounts the last time I asked – I was told by one of their staff that the redraw facility works just the same and this is simply not the case!

    Generally cannot get an offset on fixed loans either.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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