Questions about offset accounts

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From: Michael Mudman


I've just enquired about offset accounts at the Bank Of Qld to be told principal and interest repayments must be made on the loan.

I was under the impression that offset accounts could be linked to interest only loans?

Can anyone recommend a lender where every dollar held in the offset account reduces the loan principal dollar for dollar (put simply if you have a loan of $100K with $10K in an offset account on the day of settlement you are only charged $90K in interest from day 1).

If offset accounts can be linked to interest only loans, I'd imagine they couldn't be used against fixed interest-only loans?

Also, has anyone come across the lenders policy on the number of offset accounts permitted for a single loan? Could I have an offset account in my name AS WELL AS an offset account in my partners name, both linked and reducing the interest on my own home loan?

Michael.
 
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Reply: 1
From: Sim' Hampel


Yes, there are lenders out there who will allow you to have an offset account against an IO loan.

I have never seen a lender who will allow you to have an offset account against a fixed interest loan of any type. However, it would probably okay if you have a split loan (ie. some fixed, some variable), with the offset against the variable component. I am not aware of any lenders who will actually do this though (doesn't mean there aren't any !)

 
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Reply: 2
From: Rolf Latham


Hiya

Try Bankwest Gold , Westpac Rocket, ANZ Standard Variable as a start.

Better still use an independent broker.

Ta

Rolf
 
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Reply: 2.1
From: The Husband


I have an IO loan with ANZ that was a one year fixed. and they allowed me to link it to a 100% offset account. I think it is max 1 year fixed to be able to be linked.

TH
 
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Reply: 2.1.1
From: Russell Chellew


Hi all .

There are a couple of lenders who will allow 100% offset on Fixed rate and interest only.Offset can be individual names as long as they are a party to the loan .ie Loan in joint names (say defacto relationship). Each party can have an offset in their own name individually and can operate separate accounts .

Credit Union Australia

The Rock Building Society.

hope this helps

regards


Russell
 
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Reply: 2.1.1.1
From: Richard Hunt


Hi Michael,

It's time for a bit of lateral thinking if you are to achieve the best finance structure.

You may wish to consider the pro's and cons of both offset and LOC facilities before you jump. Let me explain.

If you are borrowing for income producing purposes I would stick with the offset facility. This way you will protect the tax deductibility of 100% of the original borrowed funds, should you at some time in the future eventually withdrawl funds originally deposited in the offset account. The same cannot be said for a LOC or redraw facility.

Alternatively, if you are borrowing for personal purposes (eg. PPOR), you may find that a LOC facility will give you all the flexibility you are looking for. You'll get the IO loan, the ability to make additional principal repayments and redraw them at any time at a future date (akin to offset facility), and the ability to open LOC sub-accounts should you wish to independently account for additional repayments made by two or more individuals who are co-applicants on the original funds borrowed.

If this is your situation, there are some competitively priced LOC's offered by various lenders which may change your mind about entering into an offset type loan.


Regards
Richard
 
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