Hi All
We currently have saved a desposit of 330K. Assuming stamp duty were looking at roughly 300k deposit.
We are looking to buy a property of approx 800k.
My question is, is there any benefit in setting up an offset a/c to buy our PPOR.
I have checked some calculators online and they shave off years and buckets of interest but that looks too good to be true.
If anybody has calced this or has had a similar experience would love to hear it.
Thanks
Get an 80% lend – this will allow you to use a portion of the $330k. Have the account as an IO with a linked offset. Have the excess funds sitting in the offset account.
You will may the lower interest but when/if you convert it to an IP the property becomes taxable due to the principle amount on the loan. Have all your salary deposited into this offset account and this will give you the outcome you want but the flexibility of converting to an IP and making full use of that or it allows you to accumulate funds for the next purchase.
TheFinanceShop | Elite Property Finance
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Hi Chetnik
Interest only with an offset account works well under most circumstances but there's a couple of scenarios where it doesn't.
For instance, if you were bad with money management and were tempted to simply make the minimum interest only repayments each month then P&I could be a better option for you because it's a forced method of saving.
Also, what will you do with the remaining portion of the $330k that won't go towards the PPOR? If you place it in the offset and it's used for a useful purpose then generally ok.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
That is a large sum of money. You should consider some asset protection and tax strategies.
Also the offset account is worth having, especially on the PPOR.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks guys
Does anybody have some calculators/spreadsheets where I could compare the effect of IO offset v say principal and interest
TerryW, tax strategies ? I assume by asset protection you mean setting up a trust.
Send me a PM if you like
Setting up a discretionary trust is only a small part of an asset protection strategy.
you have family members on different incomes then there are a few strategies you could use to save tax.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Bump.
Still looking for a calculator which can show me the benefit of IO with an offsett ac as opposed to P&I payments.
Any links ?
Hi Chetnik
I don't know of any.
What's the main goal with this loan?
Do you want to simply pay it off as quickly as possible? If so, set it up as P&I and pay as much as possible into the loan. Also set up an offset against the loan and have your income(s) paid into the account.
If there's another goal – like turning it into an IP at some point, then repaying on a P&I basis will be detrimental – as will using such a massive deposit.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi
Yes the goal is to pay it off as quickly as possible. But I am interested in the option of it becoming an IP as it is not likely to be our last home.
We are looking for a property for 800K. What I am trying to find out is it is better to get a loan for 800k and leave 250 in offset (assuming stamp duty and reno costs) and pay IO, or a 550k P&I only loan (therefore using that whole amount as deposit and therefore equity).
I am happy to get my pay put straight into offset and only draw for living expenses also.
For calculation purposes putting money in an offset would ssve the same amount of interest as if you put the money into the loan. So a normal calculator should work. In excel look for a amortization template.
.
For your 800k property you would be far better to get a large loan and place extra cash in the offset. This is for tax reasons.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Agree with Terry – if this is going to become an IP in the future, then take out a larger loan and drop your remaining funds into the offset.
When it becomes an IP, you move those funds out of the offset onto your next PPOR. Here's an article I wrote for API magazine that explains the concept.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Sorry couldn't see the link to the article? Can you please resend or PM me
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Chetnik
If the property may well be an investment property in the future why wouldn't you borrow $800K from day 1.
Might not be able to incorporate an offset account with a 800K loan but certainly would be worth considering.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
There is a way to borrow 100% now while still saving the same amount of interest and keeping it so that the full 100% loan is fully deductible in the future and also offers strong asset protection and you could get a 100% offset account. Careful structuring is needed.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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