Should i use the offset account?

Do what Terry has stated plus go IO.

Regards

Shahin

Hi Thorpe

Are you planning on buying a PPOR at some point down the track?

If so, you really don't want to pay down the principle on your current tax deductible debt if there's a chance you'll have a non-deductible PPOR debt in the future.

IO loans with an offset provide for maximum flexibility in the future. One of the only times when it's not an ideal option is if you're bad with money and will be tempted to simply make the minimum interest repayments each month and not drop any savings into your offset account. In that case, P&I is a forced savings mechanism.

Cheers

Jamie

Hi Luke

Interest only loans can be set up for various terms depending on the lender – 5 years is quite normal. Some will go up to 15.

Most investors roll over to another IO period once the existing expires.

Sounds like IO with offset is the way to go for you.

Cheers

Jamie

Hi Luke

Usually when the only debt they have left is IP related – then they might start paying it off.

Cheers

Jamie

Yep, agree with Terry – interest only repayments can enhance your borrowing capacity with some lenders as they take into account the actual monthly repayments.

Cheers

Jamie

Hi There

Whats the difference with between an offset Account and Line of Credit?

Also Thorpef1 dont get caught out and get a Redraw account 

100% offset accounts are the most attractive offset option. These accounts earn you interest equal to the interest you’re paying on your home loan. The interest that you’re earning on your savings is offset against the interest you’re paying on your loan. Many loan products offer access to your funds via a Visa card which can be used to pay bills, while your funds remain untouched in your account earning interest

Redraw facilities enable you to deposit any spare income you have directly into your home loan account. You can then redraw from the loan any funds that are in excess of your regular repayments. In terms of interest savings, a redraw facility has much the same effect as a 100% offset account.

If a 100% offset account and a redraw facility have the same outcome in terms of savings, what are the advantages of one over the other? Because offset accounts are essentially savings accounts and operate as such, you‘ll have easy access to your funds. Most come with an ATM, EFTPOS and cheque access, some offer phone banking and some even have a credit card.

Transaction fees may be charged in the same manner as a standard savings account, but most lenders will waive transaction charges on offset accounts altogether. Ideally, you can arrange to have all of your salary paid directly into the offset account. This ensures that any income not spent is being used to reduce the balance of your loan. While receiving the interest savings you have peace of mind in knowing that you can access your funds at any time.

Some institutions will limit you to as few as two redraws per year. Others will charge you up to $50 per withdrawal. Look for a redraw facility that provides you with maximum flexibility at minimum cost.

Be sure to find out exactly how the loan’s redraw facility operates before you sign up, because they’re not all the same. A 100% offset account will be a more attractive option than a restrictive or expensive redraw facility if you’re intending to use the account for day-to-day transactions.

The main difference is the tax consequences.

I would only ever recommend a LOC for using equity built up in a property to be used as deposit and for costs of a further investment.

 No worries

Also is it true that an offset account works effectively well when enough money is in the account earning you interest to be saving you interest?