Where to park savings?

[Elke]

We have a couple of IPs with IO loans. We live in a rental. Where do we park extra weekly savings? It may be little or more, but every little adds up over time.

What's better - to put it on one of the IP loans - but then not as good tax deduction.

Or to put into a separate savings account... But then isn't it a waste to not use those funds somehow to reduce overall mortgage debt.?

There's some knowledge here I am missing but I can't conceptualise which is better.
Ta

 

[thatbum]

...an offset account?

 

[Corey Batt]

Offset account against IP if you don't have any non deductible debt you can pay down/offset.

 

[Mick C]

offset account....

Im in a similar situation too you; have multiple Ip and live at home, personally i offset against the IP that have the highest interest rate.

 

[Paul@PFI]

Your choices are limited - If you deposit to a interest bearing account its taxed. If you park it to offset your deductions reduce which is effectively similar to being taxed except the pre-tax earning rate isn't a paltry 1.5% etc its the mortgage interest rate (in reverse) ie 4.8%... You cant get a at call deposit rate like that.

BUT if you later draw down the offset that loan reverts to its former deductible value. That's why an offset is a better outcome.

If you had a non-deductible loan the offset is always better off against that as it maximises the deductible interest. Since you don't the next best option is offset linked to a deductible loan.

 

[albanga]

Offset account against IP if you don't have any non deductible debt you can pay down/offset.

And this refers to any non deductible debt, not just property related, correct?
For example credit cards, car loan, that 80' plasma you just had to have on finance.

 

[Bandita]

Most definitely an offset account

 

[Jamie M]

I'd park it in an offset against the loan with the highest rate.

If you've got non deductible debt (credit card, personal loan, etc) knock that on the head first.

Cheers

Jamie