Dollars in mortgage or offset?
- Thread starter Amaroo
- Start date
If you're planning on renting out the property at some point then it would be best to preserve the principal.
Having said that - you're sitting on a pretty low balance at the moment so it's unlikely to be a good financial decision to convert this property into an IP at this point anyway (but I don't know the ins and outs of our situation).
Cheers
Jamie
Having said that - you're sitting on a pretty low balance at the moment so it's unlikely to be a good financial decision to convert this property into an IP at this point anyway (but I don't know the ins and outs of our situation).
Cheers
Jamie
If you may potentially use this as an investment property in the future, you're limiting your ability to maximise tax deductibility and minimise personal debt.
Example:
If you kept the entire funds into the offset, you could then use these funds as a deposit for a new PPOR if you intended to rent out the current PPOR as an IP.
If you drew this equity out through an equity access/redraw, the new borrowed funds would not be deductible and the loan would be contaminated between deductible and non deductible purposes.
Main reason would be tax - if you ever needed that money for personal expenses and had to redraw it then the interest on the redrawn amount would not be deductible.
It is generally a good idea to be paying off debt.
Once you've redrawn those funds the tax deductibility is removed.
It is. But there could be tax consequences.
1. If the property were ever to become an investment property then the interest on this redrawn amount would not be deductible.
You would also have a mixed purpose loan and could not repay the redrawn amount independantly of the other deductible portion.
2. If the property would never be rented out then there would be no interest claimed so it would not be an issue. But intentions change - so you should prepare yourself assuming the property could be rented at some stage.
Often, but not always, I have found that what I feel emotionally is at odds as to whats good for me.
Note that intuition and emotion are different things.
My gut feel normally guides me well, my emotions ..................
ta
rolf
Funds in redraw are in the hands of the bank and access can be blocked at their discretion, where as money in an offset is out of reach as far as Im aware.
The mind/brain is a fickle organ and with the right knowledge it can be easily swayed to see things in a different light, well for some of us
personally i prefer to have the funds in the offset and keep all loans as interest only for flexibility. Overtime i have upgraded houses and rented out the previous PPOR so the max debt is always claimed as a tax deduction. One option could be to have a separate account for your day to day spending and keep the offset there for lump sum deposits only.
