Browse Forums Home Finance 1 Apr 23, 2013 11:40 am Greetings Ive got a loan for land, through a broker, who said "forget INGdirect savings account, put it all into the loan; come and see me when you need a loan for the house" put all i could afford into the loan account, but noticed when interest came out, it bit into the savings. so stopped doing that, put all the extra re-payments into my offset/savings account, with the idea of servicing the loan at minimum repayment, while making sure my savings grows. offset was calculated today - $7.45 surely ING or another savings account would generate more interest than that???? seems almost a waste of time how have others saved, genuine savings that is, for construction loan while paying off land loan Cheers Justin Re: savings and offset 2Apr 23, 2013 4:00 pm It depends on what rate you can get. If the interest on your loan is higher than any rate you can get for your savings account then it makes more sense to have it I the offset. Currently you would probably get somewhere around 4-4.5% interest on your savings if you go for a fixed period but most loan rates would be around 5-6% You won't get paid any interest but you will save more on your loan repayments. Our build thread with Redink 11/1 - Prestart 5/4 - Slab 29/4 - Brickwork 27/5 - Roof Cover 20/6 - Lock Up 20/8 - PCI 10/9 - Handover Re: savings and offset 3Apr 23, 2013 4:27 pm makes sense to use offset accounts especially where it is one for one offset as it is the same as getting your mortgage rate as a deposit rate. Also if this is your principal residence then you would be taxed on your interest income but would not get a deduction for the interest on your mortgage so it makes more sense to use an offset. Regarding dipping into your savings, dont be concerned about your savings not growing because of the lack of interest as it is all cash flow at the end of the day. An offset account would allow the minimum repayment to be made however the cash flow impact would be like making the maximum payment however you would still have the offset balance at your disposal for any rainy day emergencies. not sure if that makes sense or not. Cheers Mark Re: savings and offset 4Apr 23, 2013 11:21 pm What Mark said is the way to go, with a full offset linked to your home loan you. You are basically earning interest at the same rate of the home loan interest rate, but without the need to pay tax on it. For example, if you had $10,000 in your offset for the year, and home loan interest rate was 5.5%, then you would have saved $550 in interest off your home loan for the year. If you had that money in a savings account at 4%, then you would have earned $400 for the year and depending on your taxable income, you might only get to see $200-$300 of it. The offset account is a great tool to use. Cheers Tom Re: savings and offset 5Apr 23, 2013 11:38 pm yep Tom and it actually provides cash liquidity for other uses should the need arise. i think advisors these days should layout the basics of cash flow and how different courses of action impact overall tax and cash flow. ciao Re: savings and offset 7Apr 27, 2013 12:59 pm jamt007 if you dont trust yourself then make the barrier harder. I have an account with ANZ when I got the card and pin I cut it up. Now if I want cash from that account I have to go into the branch which is a headache. Or i transfer cash out to another account, also a hassle. but I still get the offset benefits. Fiscal discipline can be learned but priorities may need to be reviewed. PM me if you wish and I can suggest simple money saving tips. ciao Mark Re: savings and offset 8Apr 27, 2013 1:03 pm cheers mark - I might ring the bank and say, can I specify an account which can replace the current offset account (such as the ING account). it wont be forever, its just while I save money for construction loan. Re: savings and offset 10Apr 30, 2013 4:11 pm And at the moment with the ing everyday account you get 5% back on all purchases under $100 made with pay wave (have saved over $100 in the last few months!) The offset is the way to go and will save you more money, even though you don't see the interest being deposited which can be a little disconcerting sometimes, it's the saving off the interest charged to the mortgage that is the plus! Use one of the calculators to compare it in savings compared to offset on the mortgage, and you don't have to pay tax on it Yes, I had already tried searching those. In the end I am fabricating my own. 4 4175 I recently went through a similar renovation and move scenario when updating our family home. We also swapped some rooms around and tackled a major… 2 10032 Unless the room is for storage then it's non compliant BCA V2 2019 S3 P3.8 You have 2 options 1. The builder deconstructs the section and rebuilds as per plan /… 7 10683 |