Benny wrote:

Hi Ronnie, What Corey means is this :-You have a $480k mortgage on a property. Mortgage is Interest Only, and you have an Offset account against the Loan. Loan repayment is 5%, so $24k per year or $2000 per month in Interest to be paid.
You put your salary into the Offset, live off your Credit card for the month, then square up with cc once a month (thus pay no Interest on the cc). A fair chunk of your salary remains in the Offset for much of the month, reducing your interest somewhat, and thus reducing your Interest payments.
THEN, you get a $100k windfall. Put THAT into Offset, and immediately the $480k loan is “offset” by $100k, bringing the amount you pay interest on down to $380k. From that point on, Interest is $19k pa, or $1584 per month instead of $2000. Sound like what you want, Ronnie?
All these Broker guys on here know and love Offsets. Just have to make sure they get set up RIGHT when starting out.
Benny

Thanks a lot Benny, I totally understand now! so using your example above, If I were to just have a principle and interest loan and no offset account and had dumped the $100,000 to my repayments nothing would change, my repayments would still be $2000 per month the only thing would change would be the loan term reduced in years, is this correct? I think I am getting the idea of it now, why doesn’t everyone use offset accounts when setting up there mortgage?

Hey Jamie,

At this stage I don’t have any loan, but just above I was referring to interest only loan as the guys mentioned that above.

Thanks

Hi Benny,

Thanks for your reply, oh WOW so are you saying Benny using my example above, If I dumped $100k into my offset account My repayments would be reduced from $2200 monthly? If I did not have a offset account and just payed the $100k to my loan would I just be paying the same repayments of $2200? I hope along the lines somewhere this is making sense, I do apologise.

Thank you

Hi Guys

Wow thanks for the information guys and thanks Benny for the other info it help me understand why not just paying off your mortgage for 30 years was the best option, I think I am getting there but still a little confused, so using the same example above if my property is $600,000 and I have $120,000 equity. I than want to buy an investment property worth $300,000 and the lender will lend me 90% LVR $270,000 than how do I use the equity to purchase the $300,000 investment property? Thanks so much for your help, I am a slow learner but I will get there!!!!

Haha yes I will ask him next time Benny. I did however ask him if I did buy this could I resell this for more after completion and than his answer was property always goes up and you should keep this longer so you can negative gear for tax purposes and claim depreciation etcc ….

One more question how do people come up with the capital growth calculations just for example melbourne cbd has a capital growth 5.0% anually (just making it up for an example) 

I want to purchase PPOR first and than later set up a Trust for investment properties. Do you have a service in Melbourne here Jamie as I will be more than happy to use your service. I always see you regularly posting on here and giving great advice, I doubt you would give stupid financial advice or scam as it would ruin your reputation on here.

Thanks

Thanks to all your wonderful comments guys, I really appreciate all this as I did not learn anything of this at school nor got taught by family.

I am just a little bit worried as I'll be purchasing this property with my partner, which I know as mentioned above Matt_Arnold post ^ 'hey, we are doing ok, let's go on that overseas holiday and blow 10K', you reduce your offset to 40K.This situation will happen because there is money available in the offset account. So I do not think this will work long term unless it was my own property purchase as I will definitely set up interest only. In my situation I think it would be safe to pay down principle and interest with the offset account even if I am losing $$$ in long term I would rather have some principle paid say in 5 years than just paying interest 5 years than with the offset account being touched because of Undisclipinary habits . This situation is tough as I know my partners money habits and is stubborn to learn " Oh don't worry we will just withdraw and I'll put it back…… Oh I need to pay for this bill and I'll pay it back ……" 

Sorry if I got off topic and mentioned the personal side, I think that is why I keep asking about this Offset interest only structure

Thank you very much FMS for the insight , but won't I be paying more interest over the time if the loan if I was to use interest only structure??? If I was just paying off interest only loan and putting my money into offset is that kind of like having a savings?? Because if I have a principle and interest only on a 240000 loan and putting my remaining savings into a offset would that be even better and paying less interest???

Thank You