Offset or More deposit

[ourhouse]

Say you are planning to buy a $300K house and have $90K deposit + extra cash for non-home related expenses. Is it better to
1. Put 30% deposit (90K) and take 70% loan
2. Put 20% deposit (60K) and take 80% loan, and put the remaining 30K in the offset account.

Which approach of the two will be cheaper for the buyer (save interest). For simplicity, assume the home is PPoR with no intention of IP during the tenure of the loan.

 

[Aaron_C]

Both would save you the same amount of interest but Option 2 provides the most flexibility.

 

[Rolf Latham]

Say you are planning to buy a $300K house and have $90K deposit + extra cash for non-home related expenses. Is it better to
1. Put 30% deposit (90K) and take 70% loan
2. Put 20% deposit (60K) and take 80% loan, and put the remaining 30K in the offset account.

Which approach of the two will be cheaper for the buyer (save interest). For simplicity, assume the home is PPoR with no intention of IP during the tenure of the loan.

so you are 100% sure the property will never ever ever ever become an IP?

Life is what happens to you while you are making other plans ( Lennon)

Option 2 with the obvious caveat that the loan needs to be IO, assuming u are ok with having money sweating in a savings acct...........many are NOT

ta
rolf

 

[CarolInPerth]

I am an absolute novice too but I'm going to have a go at guessing. Just for fun.

Putting the unused 30K back on the loan will have a similar net effect to taking the 70% loan but you'll have easier access to your money if you want to use it in future.

Of course you would want to make sure the T&C of the loan suit that purpose and there would be a difference in the outcome if it is a P&I loan or an IO loan.

I could be totally wrong

Carolyn

 

[CarolInPerth]

Hey I am learning! I was writing my post while Aaron C and Rolf answered and I wasn't far off.


Rolf, what do you mean by "assuming u are ok with having money sweating in a savings acct...........many are NOT" ?

 

[Rolf Latham]

Rolf, what do you mean by "assuming u are ok with having money sweating in a savings acct...........many are NOT" ?

Many people cant have significant accessible cash around because they will spend it................... the money sweats in anticipation of being spent on some doo dad or the like : )

ta
rolf

 

[CarolInPerth]

Many people cant have significant accessible cash around because they will spend it................... the money sweats in anticipation of being spent on some doo dad or the like : )

ta
rolf

Ahh, ok We are keeping our eye on the long term goal now. No doo dads for us!

 

[matto_]

@Carol - I have played that game every now and then also.

A good way to know whether you fully understand the concepts, being able to explain it to others.

 

[jim1964]

Many people cant have significant accessible cash around because they will spend it................... the money sweats in anticipation of being spent on some doo dad or the like : )

ta
rolf

Sounds like me