Offset or paying off principal for PPOR?
- Thread starter cimbom
- Start date
often not the best idea as an all common occurrence is people turn the current ppr one day and you can only claim the interest on the loan balance. You are not allow to redraw ect and claim that interest. I had one last week where a customer had 400K in the offset account against his 400K loan, he decided to move the 400k into the loan which automatically paid out the loan so he could not redraw the funds he needed. to compound the problem he recently left his job and was using that 400K to get by while he did a couple of developments!!!!
Hello,
Just wondering what you all do in terms of your PPOR mortgage? I am looking into making payments off the principal for psychological reasons but not sure if this is a smart move. I will still keep most or a big chunk of the savings in the offset account.
Thanks
Conflicted sometimes, logically of course offset is the way to go but don't beat yourself up if you want to pay it down too. Horses for courses and you may never turn it into an IP.
As others have said - the logical option is generally to use the offset and avoid paying off the principle. It allows for flexibility with future plans - and I've seen quite a lot of people convert their PPOR into an IP after spending years paying down a significant portion of the principle and not being able to claim much.
The psychological barrier can be difficult though.
Have you considered using the offset in a non transactional way - and not touching any of the money that goes into it?
You could then use another transaction account which you top up with enough money to get by each month.
You'll forgo a small amount of interest savings each month but it might help with the psychological aspect because you're keeping the offset money out of reach.
Cheers
Jamie
The psychological barrier can be difficult though.
Have you considered using the offset in a non transactional way - and not touching any of the money that goes into it?
You could then use another transaction account which you top up with enough money to get by each month.
You'll forgo a small amount of interest savings each month but it might help with the psychological aspect because you're keeping the offset money out of reach.
Cheers
Jamie
As a fan of somersoft, I would I also suggest saving in offset account is the best option. But ignorantly I was paying down my loan account (only PPOR) when I suddenly lost my job. It worked out well for me as I was eligible for Centerlink payments immediately. If you have money in offset account, you won't be eligible for Centerlink allowances immediately.
I am looking into making payments off the principal for psychological reasons but not sure if this is a smart move. I will still keep most or a big chunk of the savings in the offset account.
Thanks
Once you have the mindset shift, which is all it is, then you are better of storing it all in the offset. This way you hedge your bets whatever you decide in the future.
Hi,
With an offset account, is there a bank that will set the monthly repayment based on the net amount of Loan and offset account?
I have a 500k loan on PPOR and 235k in 100% offset so net is 265k.
My qibble is the fact that the monthly payment is based on the $500k. Is it asking too much to achieve a monthly loan payment based on the net of 265k?
I figure the bank is slowly eating away at my funds in my offset account, probably about 2000 a month more than I'd like, and reducing the principle too.
I thought about refinancing with another bank, borrowing 265k to payout this current loan, but correct me if I am wrong, this refinance will just mean my current bank will take my offset account funds at the time of discharge.
There is a small chance I could be stationed overseas so would rent out the PPOR. Also I like having the Offset account funds availiable
Any thoughts would be much appreciated.
Cheers
With an offset account, is there a bank that will set the monthly repayment based on the net amount of Loan and offset account?
I have a 500k loan on PPOR and 235k in 100% offset so net is 265k.
My qibble is the fact that the monthly payment is based on the $500k. Is it asking too much to achieve a monthly loan payment based on the net of 265k?
I figure the bank is slowly eating away at my funds in my offset account, probably about 2000 a month more than I'd like, and reducing the principle too.
I thought about refinancing with another bank, borrowing 265k to payout this current loan, but correct me if I am wrong, this refinance will just mean my current bank will take my offset account funds at the time of discharge.
There is a small chance I could be stationed overseas so would rent out the PPOR. Also I like having the Offset account funds availiable
Any thoughts would be much appreciated.
Cheers
Hi Harukai,
At a guess you sound like it is a St George mortgage?
They have three different types of offset accounts, yet to figure out why?
If so you need to nominate a "Repayment Option" offset which will allow you to retain the principal and be charged interest on the net balance.
Refinancing will not cause the a problem if you borrow 500k to pay out the existing loan and shift the 235k into the new offset.
At a guess you sound like it is a St George mortgage?
They have three different types of offset accounts, yet to figure out why?
If so you need to nominate a "Repayment Option" offset which will allow you to retain the principal and be charged interest on the net balance.
Refinancing will not cause the a problem if you borrow 500k to pay out the existing loan and shift the 235k into the new offset.
The money in the offset is your money so the bank cannot take it.
Sounds like your loan might be PI. To fix this just change it to IO.
Or you could be with St G as Colin suggests.
Just move banks, simple.
Similar threads
