A loan with offset account - working out repayment amount

[bettedavis]

Hi all

I have a home loan on PPOR with 100% offset, and try to work out how much extra repayment I should make in order to pay the least interest cost over the loan term.

Just confused, saying if I have $2000 available fortnightly to make the loan repayment;

Option 1: make minimum repayment saying $400 then put the rest in the offset
Option 2: use all $2000 to make repayment.


Basically no difference between two unless the bank (mine is NAB) uses different interest rates to loan balance and to offset balance?

Excuse me if I am asking a silly question, but is it just a matter of choice on how much cash you want to have on hand?

Thanks in advance

 

[Rolf Latham]

if the loan is IO, and u are"ok" with cash savings, then make the min repayment

ta

rolf'

 

[Corey Batt]

As Rolf said, IO minimum repayment will draw out the interest repayment required. You are then free to put the extra funds into the offset account.

 

[Terry_w]

If the loan is PI then the monthly repayment will stay the same no matter how much is in the offset account. This will result in more coming off the principal of the loan.

If the loan is IO then the amount each month will vary depending on how much is in the offset. Since you only pay interest any amount in the offset will be reducing the interest paid each month and hence the payment. So why not just get the interest paid from the offset each month and sit back and relax.