Draw down equity to offset to reduce interest?

[SupaRex]

Hi Everyone,

I have four properties that have been sitting around slowly increasing (I hope) in value. I have an offset account against one of these properties.

Can I draw down the equity in the properties and have the funds deposited into my offset account to reduce the interest on that loan? Is this a good idea - or is there something obvious I'm missing

Assuming it is a good idea to do this, how do I go about it?

Cheers as always,
Brad

 

[alexlee]

Can I draw down the equity in the properties and have the funds deposited into my offset account to reduce the interest on that loan? Is this a good idea - or is there something obvious I'm missing

Doesn't help. You'd be paying more interest on the loans, and paying less because of the offset.

To put it another way, having a 150k is no different interest wise from a 200k loan with a 50k offset.

However, offset balances are more accessible than LOCs (in theory).

 

[Mick C]

Hi,

As alex mentioned, it make no sense to do so..unless your planing on using the funds?


Regards
Micahel

 

[SupaRex]

Not just yet, but thanks guys. I thought there must be something obvious I was overlooking.

 

[Peter_Tersteeg]

Assuming you're paying the same interest on all the loans, by moving money from a redraw to an offset account, you're just moving money from one loan to another.

In practial terms, you're reducing debt on the offset loan by increasing debt on the redraw loan. Net effect is zero.

If the offset loan has a higher interest rate than the redraw loan, there would be some benifit in doing this, as you're reducing the interest on the more expensive loan.

If one of the loans is non-deductable and the other is tax deductable, these would be incompadible uses of the funds, so I'd advise against this plan.

 

[SupaRex]

Thanks Peter.

 

[Rolf Latham]

Hi SR

Pulling equity is a bit different than redraw in any case

equity pull usually requires a loan app.

Having cash available can be a challenge or an oppportunity depending on what u do with it

ta
rolf