How to Maximize Mortgage Savings: Offset Account Dilemma with 2 Properties in NSW

Tekuza on 22/06/2023 - 11:24
Last edited 22/06/2023 - 12:46 by 1 other user

Hi OzB community

I have two properties in NSW, and I’m looking for some general advice regarding my mortgage situation. Currently, one property has a $140k mortgage remaining at roughly 6% interest rate, with $138k sitting in the offset account. The second property has a $1.2 million mortgage at roughly 5.7% interest rate, with $150k in the offset account.

I’m considering whether it would be better to move the $138k from the first property’s offset account to the larger mortgage of $1.2 million. My goal is to save more money on interest in the long run.

Has anyone faced a similar situation? What choice did you make, or do you have any general recommendations? I understand that consulting a financial advisor is important, but I would appreciate hearing from others who have dealt with similar circumstances.

Thank you in advance for your input!

Financial Home Loan

Comments

  • deveshwar0 on 22/06/2023 - 11:28
    +2

    Humble brag?
    Why would you want to offset a mortgage with a lower interest rate?
    Are they both investment or one investment and the other owner occupied?

    • Tekuza on 22/06/2023 - 11:43
      -4

      No, not a brag at all as shitting myself with a new huge mortgage, it's genuine question as interest rates are increasing and doesn't seem like lowering anytime soon. Investment is the higher one as took it out as thought interest wasn't going to be increasing to a crazy 12 hike. Also just thought more offset irrespective of lower interest is being based off the 1.2m in interest charge?

      • AustriaBargain on 22/06/2023 - 19:26
        +3

        if you can't afford all your loans why not sell one of your properties? Surely being so stressed about money that you are literally shitting yourself isn't worth the gamble that property values/rents will double by ten years.

  • JIMB0 on 22/06/2023 - 11:36
    +7

    Depends on which one you are living in. Take all the offset money out of the investment property and put into the one you're living in.

    • soan papdi on 22/06/2023 - 11:46
      +4

      Yep. Don’t offset the investment and claim that interest in your tax. Offset your ppor as much as possible.

  • Tekuza on 22/06/2023 - 11:56

    Thanks for the prompt replies @deveshwar0, @JIMB0 and @soan papdi.

    FORUM TOPIC CLOSED https://www.ozbargain.com.au/node/238472

  • Donaldhump on 22/06/2023 - 11:58
    +2

    WHAT? assuming you don't live in either then I hate to say it but moving money from prop A to B will not save you money, prop A has a higher rate.

    I’m considering whether it would be better to move the $138k from the first property’s offset account to the larger mortgage of $1.2 million. My goal is to save more money on interest in the long run.

    prop A interest rate is 6% and prop B is 5.7%

    otherwise if you live in one offset it first

  • Drakesy on 22/06/2023 - 12:28
    +5

    $1 million in debt.
    That's $60,000 in interest a year - soon to be $70k, maybe on a $1 million house you'd be clearing $900-$1000 a week, so $45-50k a year. WTF?
    Lol
    Fek that.

    "why is Australia's housing market a false economy"

    • This
    • Ghost47 on 22/06/2023 - 13:34
      +1

      Hmm $50k a year is $961 a week. OP could move in 10 people into the house and make them pay $1200 a week, that's $120 per person per week for rent. Pretty good I reckon.

    • AustriaBargain on 22/06/2023 - 19:29
      +1

      Now factor in house prices doubling 10 years from now into your equation. We already have queues around the block to inspect properties to rent and we are about to take in a flood of a million working class Indians.

      Of course house values can't really keep rising trillions per year. Unless the government is going to let in a million more cashed up migrants just to keep the bubble growing, then it will burst.

  • Ghost47 on 22/06/2023 - 13:37
    +1

    You're gonna have to live with some strangers and take up a second job mate. Undesirable but this is the kind of thing you need to do in the current economic environment to keep your house.

  • Tekuza on 22/06/2023 - 13:42
    -2

    @Ghost47, Currently I'm living in the property with less mortgage, the 1mil it's being rented for $1k pw and the agent has recommended when the lease ends in August to increase to $1.2-1.3k pw.
    I can service the mortgage so thankfully don't need to take up a second job, but I'm slowly getting less disposible income now.
    That's why I love OzB coz of advice and talks like these, plus only time I shop for something I really want is thanks to OzB to getting it for a discount price lol

    • Ghost47 on 22/06/2023 - 13:44
      +2

      Definitely cram more people into the $1 mil. There are 400,000 people coming soon, it'll be like shooting fish in a barrel.

    • AustriaBargain on 22/06/2023 - 19:30

      Better start finding out how many bunk beds will fit in that million dollar home, and then decide for yourself if you prefer top or bottom bunk. Personally I prefer top bunk. Better to piss on your tenant than be pissed on by your tenant.

  • hasher22 on 23/06/2023 - 00:13

    I would put everything in the offset account in the property you're living in and charge the max rental rate on the investment cause you know…. that's where Australia is right now

  • Lunarboogie on 23/06/2023 - 11:03
    +2

    Congratulations OP. Don't let the naysayers get to you.

    Do whatever you need to do to get through this current period. This too will pass. And when property price rise - and they will, population growth alone will see to that - your sacrifices will be richly rewarded.

    Folk without vision see doomsday just because we're going through a wobble. Stay the course and you’ll be right. The last 200 years of this country's history has shown this.

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