RE: FIRST HOME OWNERS
Hey Helpers!
My fiance and myself are first time home purchasers and are getting confused with all the options, can someone help with our situatation?
We have incomes of $97k and $72k (before tax), have a deposit of $25k + $14k (first home owners grant), and want to borrow a max. of $500k (over 30yrs) with a variable mortgage.
Basically we are being told the best option for ourselves is a professional package (St George Advantage Package) at 6.19% p/a.
What we're concerned with is the full offset account that comes with it. How does it work to reduce your loan, and is the tax benefits worth it over the term of the loan?
What are the best options for ourselves?
Also, planning on having kids in 3yrs time and was wondering what loans off you during this period. i.e. stopping the loan for a period, etc?
Steve & B
The professional package comes to an advantage if you have multiple bank accounts. You pay one yearly fee rather than having multiple monthly bank fees.
As far as the offset account – this depends on if you decide to live in it as a PPOR.The PPOR interest amount is not claimable. However having an offset account linked means the balance is taken off your home loan balance when the interest is calculated on the home loan each day.(see note below) If you earn interest (low amount usually) on your savings account it would be taxed without any consideration of the CPI (real terms decrease of your savings).
The saving on your loan interest helps over a long period of time to reduce the time you are paying off your home loan.If it is an investment rental property any saving in interest reduces your negative gearing and thus decreases your tax deduction claim.
Note – there are two types of offset accounts – one takes the balance off the home loan for the interest calculation
– the other takes off the interest earned on the offset account balance.
Make sure it really is a full offset account that reduces the loan balance for the interest calculation. – trap for new borrowersPersonally i wouldnt go for the Advantage package as other than SGB probably have higher fees than the other majors for most things it is a Condition of the package that all loans are cross collateralised.
Whilst that may not sound a issue when you start out if you ever buy an investment home problems really start to mount up if you are not careful.
Think you could better.
Richard Taylor | Australia's leading private lender
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