Offset vs Redraw

[@theg9811]

Another benefit of offset is interest saved is not taxable where as interest received is taxable at your marginal rate.

[@MortgageBrokerAustralia]

Thank you for sharing, 100% - that's a great point

[@theg9811]

@@MortgageBrokerAustralia No worries, another thing too is even when rates rise (like it has) and you have a 100% offset say on your PPOR. your mortgage repayment still increases but the interest you pay does not. As rates rise your return gets bigger and bigger as every payment you make goes to reduce the loan balance and not pay the bank any interest. I know the banks don't like this and its a great way to still have access to your money.

[@MortgageBrokerAustralia]

It's evident that you have a solid understanding of how offset accounts work, @theg9811. Your point about how they can be particularly beneficial during periods of rising interest rates is insightful. When you have a 100% offset account tied to your principal place of residence (PPOR) loan, the rise in interest rates won't impact the amount of interest you're effectively paying if your offset account fully covers the loan balance. Your mortgage repayment may increase, but since your offset account is effectively reducing the loan balance, the interest paid does not increase. Essentially, you're using your savings to work against your loan balance and save on interest charges. Indeed, the more you put into your offset account, the more potential you have to reduce the interest charges on your mortgage, especially when rates are rising. Plus, as you rightly pointed out, you still have access to your money. It's a way to achieve a good return on your money (in the form of saved interest) that's potentially much higher than what you might earn in a typical savings account, especially in a low-interest environment. And while it's true that banks might prefer you to pay more interest, they also offer these accounts as part of a competitive mortgage market. It's a tool that savvy borrowers can certainly take advantage of. Great insights, @theg9811. Your understanding of these financial mechanics can help others make more informed decisions. Thanks for contributing to the discussion.

[@theg9811]

@@MortgageBrokerAustralia Thanks for your video, most people don't understand about how to save paying non deductible interest and make every $1 you earn count. Once the compounding effect of making payments without interest works on your non deductible home loan debt, you end up with a large sum you can redraw against the 30 year mortgage as your ahead of your repayment schedule. I urge people to do this first, as it allows you to build up cash reserves without any tax consequence. Banks will also treat customers better with cash deposits and reserves.

[@typtyp7]

Savings accounts were never in discussion here.

[@Robi_Rules]

Thanks a lot for this. I was looking for same info and this is very helpful. One more query: Can we have Offset & Redraw facility together means > Offset Account Attached to a Loan Account > Same Loan Account has the Redraw facility How does it work?

[@theg9811]

If you ahead on your repayments you can redraw these values. Its shown in most loan accounts how much you can redraw. Note there is a fee to redraw

[@MortgageBrokerAustralia]

Thanks Robi, yes you can have a loan that allows both an offset account as well as redraw.

[@johnnylui4914]

​​@@MortgageBrokerAustralia I had the same question too. Do you have a calculator that shows how much interest is saved if you had an offset account together with making additional repayments? Assuming you would save more interest right? E.g $500k loan, $50k in offset, instead of the minimum payment of say $1500 per fortnight, we put in $2000. Thanks

[@ResidentGlitterCrazy]

Hi. Isn’t an offset account an unsecured deposit? Therefore in the event of a bail in, if you had your entire house offset, not only would you loose all the money, you would also have to pay the entire mortgage off again. That is if it too is taken from you. Please let me know your thoughts.

[@MortgageBrokerAustralia]

An offset account is a type of savings account linked to a mortgage. The balance in the offset account is deducted from the mortgage balance before interest is calculated, which can reduce the total interest paid and the term of the mortgage. Confirming the offset is a transaction account and would be covered under: www.apra.gov.au/list-of-authorised-deposit-taking-institutions-covered-under-financial-claims-scheme

[@Lavidavi_]

If there is balance in offset account 50k and redraw 10k and loan amount is 200k what will bhi the total loan balance in this case

[@MortgageBrokerAustralia]

Would be the total funds of $60k less the loan amount of $200k, making $140k

[@kailicen5459]

good information, but i feel like the speaker kept tipping his toe (or body) which was very distracting..

[@MortgageBrokerAustralia]

Ok thanks so much we'll keep that in the mind in the future! Thanks