Share Your Thoughts - Home Loan with Offset

usmanyousaf on 15/11/2020 - 21:50

Hello folks,
Since RBA has reduced interest rate, loans.com.au reduced the home loan interest from 3.09 to 2.5 which is great. However, I was wondering if there is any better option available in the market with offset account.
After a quick search, I found
1. homeloans.com.au providing loan with the interest rate of 2.14 (offset included)
2. wellhomeloans.com.au providing loan with the interest rate of 2.20 (offset is $10 extra /month)

I am below 60%LVR.

Appreciate if you share your ideas or findings where I can take an advantage as well. Thanks

Financial Home Loan

Comments

  • oscargamer on 15/11/2020 - 22:53

    What's your loan value?
    What's the amount of offset you have?

    • netjock on 15/11/2020 - 23:08

      You are right.

      People need to know the underlying number that is multiplying by the percentages.

      If big4 is offering 4 years fixed at 1.99% why would you want to pay 2.14% with offset. Unless you believe that rates will go negative and we know RBA governor doesn't like negative interest rates.

      • usmanyousaf on 16/11/2020 - 07:27

        offset is a preference. I understand getting fixed rates is a tempting option. It is just a personal preference.

        • netjock on 16/11/2020 - 11:06

          You need to consider also how much you going to have in that offset?

          If you have $40k in offset is very different to say having $10k. You could use redraw like an offset but it is entirely up to you.

          Say you have 10k in offset.

          10k @ 2.14% = $214
          10k @ 2.20% = $220 - $120 ($10 per month) not worth it.
          This is just the offset, don't forget you are paying 0.06% more on the rest of the loan, peanuts but just means double strike for this 2.2% deal.

          Personal preference would be 2.14% and just use the redraw like an offset (but people here is worried about banks going bust and taking your money with them).

          • Ughhh on 16/11/2020 - 11:12

            @netjock: Need to take into consideration future plans, if you're thinking of turning property into an investment property, then offset is better from the get go.

            • netjock on 16/11/2020 - 11:20

              @Ughhh: If you are thinking of turning it into an investment property take the money out before the date you are going to put it up for rental or sign rental contract. The ATO has no business looking into after tax income movements before you start claiming tax deductions.

              You could withdraw it and burn it for all they care. Most of you are thinking of taking the money out and spending it on a private use car. If you are taking it out and putting it into productive assets (like buying shares) then it too should be tax deductible.

              If this idea of turning property into investment property I have no idea how people argue taking money out from their OO home loan and buying shares is tax deductible (but it is).

              • Ughhh on 16/11/2020 - 11:32

                @netjock: ….

                If you are thinking of turning it into an investment property, have an offset account in the get go to make accounting easier.

                • netjock on 16/11/2020 - 12:24

                  @Ughhh: Could help if you read your statements which tell you how much interest you paid for the financial year. Or just download your transactions and look at the interest added during the financial year.

                  Saying it is accounting is just trying to make it sound fancy. Basic record keeping, reading and arithmetic. It isn't even math. Don't call it accounting.

                  • Ughhh on 16/11/2020 - 12:29

                    @netjock: https://www.domain.com.au/advice/how-to-turn-your-first-home…

                    https://www.mortgageport.com.au/information-and-tips/why-pro…

                    If you only care about now, sure don't worry about offset, if you want options and to to think further, consider offset.

                    • netjock on 16/11/2020 - 14:51

                      @Ughhh: The Domain link says The money that was redrawn was used to pay for the new home, not the existing property, so this will fail the “purpose test”

                      It is because you are drawing money for private use. If you are drawing money out to buy another investment property then it is tax deductible. You still don't get what I am saying.

                      Mortgageport article, you need to know who is writing it. My mortgage broker mate says to me. The more you borrow the better commissions and trailing commissions I get. If offsets don't reduce the loan number they make more. It isn't in the best interest of mortgage brokers to tell you to live within your means.

                      • Ughhh on 16/11/2020 - 18:12

                        @netjock: Did you read the examples at the bottom….?

                        • netjock on 16/11/2020 - 18:47

                          @Ughhh: Point is: only relevant if you are using the money for non income producing activities.

                          Example you are proposing is moving out of your primary home and buying another primary residence, turning your current residence into an investment property, you also lose your primary home capital gains tax deduction over time. Which might leave you worse off than a few percent in interest.

                  • usmanyousaf on 16/11/2020 - 13:05

                    @netjock: As I said before, offset account is personal preference…I am not debating this which option works out best(with or without offset) ….and neither I am trying to prove you wrong….appreciate if we stop this debate.

                    • netjock on 16/11/2020 - 14:44

                      @usmanyousaf: It is actually a very useful topic working out tax deductibility of interest. It is actually a lot more useful than an offset account. It is good public information also.

    • usmanyousaf on 16/11/2020 - 07:23

      loan value is around 250k. Offset is just a preference.

  • Ughhh on 15/11/2020 - 23:18
    +1

    homeloans.com.au providing loan with the interest rate of 2.14 (offset included)

    I was with them originally, but they increased the rates 3-4 times within a year, while still offering the same original rate on the website.

    • dcep on 15/11/2020 - 23:57

      homeloans.com.au , or loans.com.au

      • Ughhh on 16/11/2020 - 00:04

        Homeloans

      • usmanyousaf on 16/11/2020 - 07:27

        I am already with loans.com.au and they are offering 2.5 atm.

  • Gunther on 16/11/2020 - 00:21
    +2

    1.79% with full offset here

    https://homestarfinance.com.au/

    • usmanyousaf on 16/11/2020 - 07:28

      Thanks Gunther….I shall definitely consider this. cheer.

    • tomsco on 16/11/2020 - 08:05
      +1

      Geez. Is that a error or something? The Gold is cheaper than the essentials. Or is it just because it's max 60% LVR (still seems quite low for 100% offset included).

    • adzyau on 17/11/2020 - 09:27

      60% LVR and owner occupier only FYI.

  • avoidfullprice on 16/11/2020 - 13:04

    My thought is just chasing low interest rates without considering the fees and how you will use it could set you back further.

    Having an offset can be no better than getting a lower rate account and park your everyday money in a normal transaction account. It depends on how you use it.

    Otherwise your two options seem to be good enough for what you want. Freedomlend seems good too but havent run the numbers.

    Vague details, vague suggestions. Good luck.

    • jv on 16/11/2020 - 14:55

      Having an offset can be no better than getting a lower rate account and park your everyday money in a normal transaction account.

      Not really…

      An offset reduces the amount of interest you pay, unlike a normal transaction account.
      The amount you save is not taxable as opposed to any interest you earn in other accounts…

      • avoidfullprice on 16/11/2020 - 16:26

        How much difference are we talking about?

        I'm pointing out without details, it can swing both ways.

        • jv on 16/11/2020 - 16:28

          How much difference are we talking about?

          The interest rate on your loan x the amount in your offset…

          • avoidfullprice on 16/11/2020 - 16:29

            @jv: But OP is not providing that, so it is assumption X assumptions.

            Don't worry about it jv, read about OP is not interested

  • adzyau on 17/11/2020 - 09:30

    Has anyone found better than homeloans.com.au investor rates?

    Lowest rate i can find with 100% offset, no fees (only discharge fee $300). They only do a variable rate but RBA have come out and said they probably wont raise rates for about 3 years.

    • Gunther on 17/11/2020 - 13:48

      Why do you need offset with investment loan?
      You should have all your spare cash sitting in offset account against your PPOR.

      • adzyau on 17/11/2020 - 15:19

        Got free housing.

        Doesn't matter anymore, they don't lend for constructions.

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