Hi,
Think I may know the answer to this question but its late and just want to check im not missing something glaringly obvious.
Is it ever worth paying down the mortgage on any property (PPOR or IP) if there is a 100% offset account set up against it? Surely by pumping the money into the offset account you are receiving the benefit of paying down the balance, with the flexibility to withdraw and make full use of the tax advantages of the deductable debt at a later date.
Cheers
D2B
An offset account has to be a 100 percent offset account as some types of offset accounts are not offsetting 100% off the loan balance at mortgage rates but rather just reducing the loan interest rate by a savings account interest rate on the offset balance.
(Warning for first time offset account user)
Some investors have made the mistake of paying the loan down only to find it is hard to access the redraw money where as an offset account balance can be used for anything.Another powerful method is to put your wage payments straight into the offset account and take advantage of an interest free period on a credit card for expenses and then pay off the credit card at the end of the month. (this requires good financial will power with credit card spending)
and make full use of the tax advantages of the deductable debt at a later date.
What you have to ask yourself is what marginal tax rate are you on as it is probably 30% max if you earn <$80,000
So you want to lose $100 to get $30 back as a tax deduction.
http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm(Be careful as negative gearing is not as attractive as it used to be due to lower tax rate scales)
Yes agreed with Duckster
The banks wish for you to pay your loan down(reduce their risk) and then it becomes harder to release that equity to move forward(Especially in the current tight credit market!!!!)
Offset accounts are great if you are savy with your budgeting and your loans are partly or fully floating rates. Fixed rate loan interest repayments are generally not able to be offset.(I may be corrected??)
Hi D2B,
The boys here have given good investment advice and is the best way to go in a perect world.
But ,many people dont have the self control to leave the funds in the offsett always.
They see something they "need" and go the easiest place to ind the money to buy it.
Just a thought for you mate.Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
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