Hi
I may be missing something here – but cannot find a calculator for this.
If i have an Investment Loan say 200K with 100K in equity that I draw out and place in 100% offset account
My balance becomes 300K and my interest repayments are calculated on 200k? – However as my loan is P & I doesn’t my principal repayment increase?How can I work out what my new monthly repayment is?
I.e. with offset balance.
Thanks
Yes think you are getting a little confused.
If the loan is $300,000 then the P & I repayments are based on this loan amount.
If you have $100,000 sitting in a 100% offset account then interest is only charged on the net balance i.e $200,000.
Therefore the difference between the 2 figures is a principal reduction.
As the principal debt reduces the amount of interest reduces but assuming that interest rates do not change the monthly P & I repayment will stay constant.
Richard Taylor | Australia's leading private lender
Thanks for that Richard.
I think I follow. So the difference in the repayment amounts goes to the principal.So given the opportunity to draw out the equity. Should I do it and place in an offset account?
Ie money would be used for possible investment property deposit. The existing loan is also investment & I have no other debt.
Will increase my repayements about 1K per month.
Now i would wait until you have found a property and are ready to pounce.
Also why would you have a P & I investment loan ?
Richard Taylor | Australia's leading private lender
I do not have any non deductiable debt.
You may still argue against p&i
Figc,
I am sure Richard will explain in detail, however having an Interest Only loan with an Offset account gives you the same identical interest cost as paying down a P&I loan, however with greater flexibility.
There are some great posts on this around the forums (probably 50% of them are from Richard), so perhaps have a look around and then fire any general questions back here.
That was insightful Sandeep. Looking forward to your next post
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]
Figc wrote:HiI may be missing something here – but cannot find a calculator for this.
If i have an Investment Loan say 200K with 100K in equity
So P & I has been calculated for a 200k loan
Figc wrote:that I draw out and place in 100% offset account
My balance becomes 300K and my interest repayments are calculated on 200k? – However as my loan is P & I doesn’t my principal repayment increase?It should however it may not. You have to check that the bank alters the repayment required to pay off 300k otherwise you could be paying repayments levels based on 200k while your loan balance gradually increases by not paying off enough interest on the extra 100k debt place not be paying anything off the loan.
Don't laugh it has happened to me !Figc wrote:How can I work out what my new monthly repayment is?Use amortization template in excel or a repayment online calculator.
Figc wrote:I.e. with offset balance.Offset balance comes off loan amount for interest calculation
You could work out the interest amount for the offset amount
So I = offset amount * int rate / 100 * 1/52 to make it a weekly amount and then make this an extra repayment in the calculatorIf you borrow 100k and push loan up to 300k and then offset 100k you are in effect only got 200k interest calculation
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