How to make my money work for me in current conditions

Hi All,

I am looking for a little advice or suggestions relating to my current situation..

I’m currently a salaried employee and I have an investment property, details below:

Market Value: $110k
Loan amount: $90k (current interest rate is 5%)
Weekly rental: $180

The property is costing me very little to hold (probably slightly positive cashflow).

Taking the above into consideration, I have a lump of cash and given the current market conditions, I’m not sure how to best utilize the cash and make it work for me as:

1: Fixed / Savings rates are so low
2: Stock / Crypto markets too volatile and risky at the moment
3: Not ready to use the funds to purchase a PPOR (i have a decent size deposit)

Added to the above, the only debt I currently have is the mortgage for my IP ($90k @5%). I have no credit card, vehicle finance or store accounts.

Would it make sense to park some of my cash into the offset account of my mortgage account? My thinking would be that parking some funds there would reduce the amount of interest payable therefore paying off the capital amount quicker.

At the moment I have my funds sitting in a savings account @1.5% and don’t really feel that im making those funds work for me, however, I don’t feel the time is right to add the cash into other assets classes (stocks, etc) nor am I decided on buying a PPOR.

Interested to hear some suggestions.

Thanks in advance.

Cheers,
Robbie

 

Park the money in an offset attached to your IP loan.
Even taking tax into account you will receive a greater return with maximum safety.

 

Is there any money currently in the offset, and where did that money come from?

 

Currently, there is no money in the offset and the funds have come from the sale of my PPOR when we moved interstate.

 

As @Marg4000 says it’s a no brainer to have the cash in an offset even more so with such a high interest rate.

If it’s more than the $90k you may want to have a look at the numerous threads on here about making the most of the current opportunity associated to the global stock market downturn.

 

I have been buying small amounts of blue chip stocks over the past couple of weeks, which i plan to continue doing over the coming weeks, months etc.

 

Lets say i did park $90k into my offset account, which is linked to my $90k homeloan, is there any possibility that a bank could lock in these funds, settle the mortgage or prevent me from accessing these funds?

 

Nothing can be answered in a definitive way on here as we don’t know your individual circumstances for example what do the T&Cs of your loan agreement say? Is it a true offset? which financial institution is it? Are they an ADI etc etc.

However without all that info I’d say in the majority of cases you would be fine but obviously this is an opinion and not advice.

 

theres a possibility that an alien invasion might make all of this meaningless.

your question is 1 impossible to definitively answer and 2 useless for decision making.

Risk is rarely a yes / no decision.

 

Ok great, let me give the bank (AMP) a call on Monday and find out all the intricate details. I'm happy to park funds there (temporarily) but need to be sure ill always have the flexibility of getting the funds out if i wanted to take advantage of an opportunity.

 

What will you ask them?

 

Not sure, could you suggest the wording i could use?

I have also asked my mortgage broker.

 

I think what @Skinman and @Trainee mean is "Yes", if things go really pear-shaped, then you will find your offset account is not a "savings" accounts, and therefore not subject to any government guarantee.

 

Though to clarify, 'there is a possibility' is not the same as 'likely' or even 'probable'. You have to consider the level of risk to make decisions, not avoid any possible risk.

 

Given that anything is possible in these current conditions and things could easily go very pear shaped, I guess i dont need to "put all my eggs in one basket" and spread the risk a little. For example, $25-30k could be put into the offset, instead of the full $90k.

Not in my lifetime do i recall the world literally coming to a standstill like this and who knows how long it can go on for and the immediate and delayed ramifications.

 

Hey mate, no one is having a dig. Just trying to give the best opinion possible based on the limited facts that can be shared on a forum. Just be mindful that if you only put $30k in the offset. You should really have a think about deploying the rest of your cash to work harder than the 1.5% minus tax account it’s currently in.

 

actually the gfc was scarier, and that was only 10 odd years ago. Think people are more scared now because the virus has physical implications.

the gfc doesnt look as scary now because it eventually passed, and because people dont understand what a collapse in financial markets means (and no, a stock market correction isnt actually a crisis).

If you honestly thought it was that scary you would buy gold bars and guns.

 

You will find that the terms of your loan contract allow them to use your deposits with them to repay any debt you have with them.

But this is only likely to happen if you start failing to pay the loan.

 

What other options are out there for people sitting on cash who are trying to get a return?

 

depends how much you like to play with knives.