i recall advice in the forum:
1. Use LOC for all investment related expenses/incomes
2. Use Offset for all personal income/expenses
rough calculation shows that with the bank account, you earn more interest than the mortgage interest you save... (is it correct?)
//offset case
e.g. 10,000 in offset, reduces mortgage interest 7%
but mortgage interest is tax deductible,
effective amount earned/saved = amount * mortgage_interest * tax_bracket_rate
=10,000 x 7% x 40%
=10,000 x 2.8%
//bank account
10,000, earning 6%
effective amount earned/saved = amount * bank_interest * 100-tax_bracket_rate
=10,000 x 6% x (100-40)%
=10,000 x 3.6%
so would it be better to
1. Use LOC for investment related expense/income
2. Use interest earning account for personal expense/income
?
1. Use LOC for all investment related expenses/incomes
2. Use Offset for all personal income/expenses
rough calculation shows that with the bank account, you earn more interest than the mortgage interest you save... (is it correct?)
//offset case
e.g. 10,000 in offset, reduces mortgage interest 7%
but mortgage interest is tax deductible,
effective amount earned/saved = amount * mortgage_interest * tax_bracket_rate
=10,000 x 7% x 40%
=10,000 x 2.8%
//bank account
10,000, earning 6%
effective amount earned/saved = amount * bank_interest * 100-tax_bracket_rate
=10,000 x 6% x (100-40)%
=10,000 x 3.6%
so would it be better to
1. Use LOC for investment related expense/income
2. Use interest earning account for personal expense/income
?