Borrowimg more than needed to get discount...

From: Jay Hunter


Hi all,

We bought a home (place of residence) last year and decided on the W.pac rocket repay HL with 100% offset... we got the bonus 0.7 discount that everyone should get...

We borrowed more than we really needed to give us some breathing space (although we have slightly higher repayments) but this is ok as we want to pay it off asap anyway...

we now have 30k-40 to put into the loan
(we don't foresee us needing this money in the short term...) but am unsure if we should leave it in the offset account of transfer it onto the loan...

my understanding is we have the same benefit regarding int. rate reduction either way ??

our plan is to purchase 1 0r 2 ip's over the next 18months... any pro or cons regarding whether we should;ld put the money into the loan (and redraw if required) or just leave it on the offset??

any view would be great!
thanks jay
 
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Reply: 1
From: Rolf Latham


Hi Jay

Clever move doing that, Westpac allows that, AND gives the broker comm on the initially borrowed amount.

The discount will remain,it is contracted, even of your loan balance falls below say 50 k.

Where to park the money depends on your spending habits and your attitude to loose money. Financially there is ZERO diff to a P&I loan like the Rocket.

If it were an IP I/O Loan, then you would leave the spare cash in the offset, since a redraw from the loan for private purposes would result in a loss of tax deductability for that portion.

Ta

Rolf
 
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