Which loan structure?

Hi George

There are three main ways to make use of extra funds to benefit your mortgage. Line of credit, redraw, and offsets.  The line of credit is a fully transactional mortgage whereby your loan is more similar to a credit card with extra zeroes in the credit limit, and anything you pay off the balance can be immediately accessed via any method you imagine: phone, internet, ATM, EFTPOS, or cheque.  The redraw facility on a normal term loan can be very limited with high fees, or can be nearly as flexible as the line of credit.  The offset account is where your savings are physically separated from your debts with a separate account and statement, but directly benefit the debts interest charges.

If you are considering turning your property into an investment in the foreseeable future, you will want maximum deductions, and any money redrawn/withdrawn from a line of credit or via a redraw facility will only be deductible based on WHY you withdraw it that time.  If you withdraw for your groceries or any other non-investment purpose, you will not be able to claim the interest on that money as it's considered 're-borrowed' for personal use.  The clear choice is an offset account because you can benefit your mortgage without actually paying into it, and thus you won't be reborrowing it if you access it later.  Of course, take tax advice from an accountant familiar with your personal situation and goals, not a forum!

7.55's a competitive rate, just make sure you also compare FEATURES, not just rates.  The obvious question for you is "Can I make extra repayment without penalty", and, "Can I access payments in advance of the scheduled loan balance?"  Ask your broker to present and compare at least two or three different bank's products, features and rates.  Sometimes it's worth trading features for rate – sometimes you can have your cake and eat it too!

Many fixed loans aren't very flexible, so consider splitting your account with a small variable portion (to minimise the impact of rate changes) as these are usually more flexible – again familiarise your self with the features and fees of each loan after settlement.  A 0.25% rate rise will only increase a $50,000 variable loan by $2.41 per week.  This way you can go hard on a variable portion while all but ignoring the fixed 'split'.  Of course, if you have a 100% offset account, it should be as flexible and accessible as a regular savings account, except every $1 in balance is saving you interest every day.

Hate to disagree with a new comer to the forum but you are not correct with this statement

Also, FHOG rules clearly eliminate you from claiming it if you or your spouse/partner have ever owner any kind of property in Australia. You can't get it even if you've only owned an IP.  It's not the 'First PPR Owner's Grant'  (sadly).

A person is not eligible if they or their spouse (including de facto spouse) have held a relevant interest in any residential property in Australia prior to 1 July 2000.

However, a person may be eligible if they or their spouse (including de facto spouse) have held a relevant interest in residential property in Australia on or after 1 July 2000 and they have not resided in that property.

Where the property was purchased post July 1 2000 solely as an investment property and you hav enot lived in that property you are certainly entitled to claim the relevant State administered First Home Owners Grant. 

Any State based Stamp Duty concession is a different matter.

Yes it has been the case since July 2000.