Hi All,
Basic Home Loan (Extra Repayments with Redraw facility)
For example
Loan : $300K
Interest rate : 5.07%
Savings : $20KBy transferring my savings $20k into the mortgage as extra repayments, it reduces the loan to $280k, which also means i am actually saving 5.09% of my $20k savings. And i can redraw my extra repayments anytime.
Is this method any differences from Variable home loan with 100% offset account?
Cheers
NitIs their a minimum amount for each redraw and have you checked if there is a fee attached each time?
Hydra
hydramax wrote:Is their a minimum amount for each redraw and have you checked if there is a fee attached each time?
Hydra
yes, i have asked, i can redraw any amounts in my extra repayments.
No fees attached for redraw via internet as it is St George Basic Home Loan. Got a black and white email from St G customer service on this.
Cheers
NitHi Nit,
The two scenarios you are talking about would work in the same way. Whether you have your $20k sitting in the redraw of the Basic Home Loan, or in an Offset Account variable loan – you will still be paying interest on the amount ($300k minus your $20k) and you still have the funds available to you should you need them.
Main things to consider are:
– Are the interest rates on both loans the same?
– Are you disciplined enough to have all your funds sitting in an offset account (your normal transaction account) without drawing on the funds?
– Will you have high amounts of money sitting in your normal transaction account (beyond your $20k)?These factors will all affect the amount of potential interest you could pay and things you should consider before deciding which way to go.
Cheers,
Matt.
what about the tax consequences?
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
Terry,
Are you asking the question to through another spanner in the works, or do you know the answers to that sort of question?
What are the tax implications, if Nit was to go with either option…?
I am not a tax advisor, but know that redrawing from a loan means 'borrowing'. So this can creat big problems later on if the interest on the loan is ever claimed.
Using an IO loan with a 100% offset is a way to avoid this.
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
HI Nit,
is this loan on an IP or a PPOR?
There wouldn't be tax implications if it was your PPOR.
cheers
Sonya
Uless it later becomes your IP
sonyasal wrote:HI Nit,is this loan on an IP or a PPOR?
There wouldn't be tax implications if it was your PPOR.
cheers
Sonya
Thnx Sonya. Currently it is for PPOR.
Terryw wrote:I am not a tax advisor, but know that redrawing from a loan means 'borrowing'. So this can creat big problems later on if the interest on the loan is ever claimed.Using an IO loan with a 100% offset is a way to avoid this.
Thnx for your posts. Your post scared me. Just rang St G to confirm there will be no extra fees or interests charge when i redraw my money in the 'extra repayment' pool via internet banking.
If going via the variable + offset method, i will be paying higher interests. But being a PPOR, i reckon this is the best way.
Cheers
NitBtw, one of the little "CONs" of Redraw facility is.
The extra repayments you made, will only appear after the next repayment day.
Say, if you made extra repayments $10k on the 15th Oct, and the monthly repayment is on the 1st of each month, this $10k will only appear on the 2nd Nov as extra repayments, even though the mortgage loan is reduced with interest calculated on the 15th Oct.
Hence, any urgency for $10k, have to wait for a while unlike the offset accounts.
However again, variable loans come with a annual fees.
Cant have the best of both worlds right to these legalised LoanSharks?
Cheers
NitAnother little spanner in the works may be if you are able/wanting to salary sacrifice – I was advised the other day that you cannot sacrifice an Offset mortgage, however you can if it has a redraw facility.
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