Hi all.
I am in my first property and currently my mortage is 360,000 and have 330,000 in a 100% offset account. my partner and i are looking at having kids soon, my question is what should i do?
We will be going to one wage so would like to reduce the repayments how much should i put into the loan? will i pay it off quicker if i put most of it into the loan and what if we want to buy an investment down the track
As long as you don't spend the money leaving it there will result in the same interest as paying off the loan.
Maybe you could change it to IO and your repayments will drop dramatically – but the interest will be the same.
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
I am with Terry i wouldn't be paying anything into the loan itself.
On the basis that you dont need the interest to live off switch the loan to Interest only and you will only be paying interest on $30,000.
Richard Taylor | Australia's leading private lender
So that means i wilkl only be paying interest on the aprox 30k, but my loan will still be 360000, how will i ever pay it off?
Does it matter if it is paid off? Imagine if you had $360,000 in the offset = no interest.
You can't really reduce the repayments and pay it off quicker, but you could extend the loan term maybe – but no point i think
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 and Richard both have good points.
It depends on what will make you feel more comfortable. Paying the loan down might give you comfort, whereas having the offset account buys you time.
Consider if you paid down say $200K into the loan and had the remaining $130K in the offset account. This will give you $130K worth of cover for payments that you might struggle to make on one income.
Compare this with $330K of cover…In both cases under IO you would be paying the same in interest repayments (if structured correctly).
It also depends on what you plan to do with the property you are living in. Do you plan to stay in it forever and buy an investment property or will you upsize and turn your current home into an investment property? These decisions will make big differences to the best setup for payments and offset accounts and getting it right now could save you considerable amounts in the future.
Knowledge is EmpoweringLincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.auWhat i would like to do is reduce my repayment when we go to one wage, see how it goes then invest in a unit or house.
If investing should i keep some money for that? when you invest do have a bigger loan for that and less for my place or vice versa?If you pay Interest Only, it doesn't make a difference (if you are with the right bank) in paying it down of having the offset account.
This also keeps the cash free for deposit and costs for your investment property.There are also ways to restructure your current loan to help with any investment property to ensure you use as little cash as possible.
When you are investing, the loan against the investment property will have tax deductions available and generally the higher loan you can afford, the greater the tax benefit. And while you have that loan, keep an offset account against your home as those payments are not tax deductable and should be reduced where possible.
Knowledge is Empowering
Lincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.au
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