Loan Tip: Why would someone want 2 offset accounts on the one loan?

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 7th May, 2020.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    The main reason would be for budgeting by segregating money into monies into different buckets. Some like to save 10% of their income each week to build up a holiday fund. Some may want to build up an education buffer, others might want to segregate an inheritance etc. I have seen clients with offset accounts who do this and have been putting the segregated money in low interest savings accounts instead of offsets. This makes them lose interest savings on the home loan. For every $10,000 you have stored elsewhere you are losing about $300 per year in savings.


    The other is the informal trust argument. Spouse A might own the property with the offset accounts needing to be in their name only. Spouse B might solely use offset 2 to deposit their salary and savings and keep this segregated from Spouse B. It could be formalised with Spouse A declaring they hold that account as trustee for B. This way if Spouse A suddenly dies Spouse B can get their money back if they don’t want it to get via the will of Spouse A.


    This can also happen where funds are borrowed from parents to save interest. Dad has $100,000 in a savings account earning 0.1% so son borrows from him and gives him 2% with Son saving himself 1% or $1000 per year roughly. It is a good idea to keep these funds segregated so they are not spent and can be given back to dad at short notice – Dad should also be getting legal advice too.


    Another reason – a misguided one – is that some people like to drawn down part of a loan and segregate it from cash. It might be a good idea where the loan is split but where there is one loan it will have no effect as the segregation has to occur at the loan level too not just in the offset account.


    Some of the lenders offering multiple offset account son one loans split include

    AMP, Macquarie, Suncorp.
     
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  2. Tattler

    Tattler Well-Known Member

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    Also CBA.
     
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  3. Niche

    Niche Well-Known Member

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    I always thought it was common to offer multiple offset accounts?

    Am I just being naive in assuming that most lenders do since both lenders I have gone through offer them?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Not so common. Many lenders offer one on several splits - often for an extra fee. but some offer multiple on the one split.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    But the inverse is a bad idea. One offset and multiple loans. You can end up with blended loans by co-mingling the proceeds from the split loans through the offset.

    And with multiple offsets never move money between offsets unless you really are clear that neither is linked to a deductible loan. Or a loan that could ever be deductible in the future.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I don't think these exist.
     
  7. inertia

    inertia Well-Known Member

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    Yep. We are running multiple offsets on the PPOR just to assist the psychological side of managing our money. The bulk of the offset is our buffer account, another offset for building up the debt recycling funds, and a bills/transaction offset.

    Cheers,
    Inertia.
     
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  8. SA-Investor

    SA-Investor Active Member

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    BankSA (Westpac group) offer unlimited offsets and it is very useful.
     
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  9. Ponty

    Ponty Member

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    Hello I am a new poster to the site and need some guidance. I have two mortgages, one PP and one IP, which is now a PP.

    I moved into the IP a year ago as my PP was being used as a Holiday let as I had a job which provided accommodation which I now no longer have. I had to move into the IP as I had holiday bookings I had to honour in the PP.

    My IP Interest only mortgage ceased in March this year and I have been trying to sort out a new mortgage deal with my bank since December

    My bank has offered me a mortgage of Annual Percentage rate of 4.58% with a 1.75% discount giving me a rate of 2.83% on the PP (which was the IP). This mortgage now also has the Offset account attached to it with a 150000 balance.

    Previously the 150,000 did not sit in the Offset Account it. sat in the Mortgage account as I was told by the bank it did not matter which account it sat in, Offset or Mortgage it would have the same outcome. In my last statement it quoted that I had saved 11 years off my mortgage, now my Offset has been removed and attached the the new PP mortgage does that affect my 11 years reduction?

    Can I combine these mortgages and take out one mortgage? The 319,000 property is worth about 750,000 and the 450,000 mortgage is worth about 570,000.

    Is there an organisation I can have my original PP mortgage checked over by.

    I am presently with the Westpac Bank.

    Sorry if this post sounds complicated, any advise greatly appreciated.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    It seems you redrew from the loan and moved money into an offset account. This is reborrowing. It seems you borrowed from an investment loan and are now using this money to offset the main residence loan.
    This is a tax nightmare.

    Now do you want to combine an investment loan with a non-investment loan? That will be mixing the already mixed loan.

    You would have lots of tax issues if claiming the interest and should seek the advice of a lawyer or tax agent.

    Also the rate is very high - a broker could help you with that.
     
  11. Ponty

    Ponty Member

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  12. Biggbird

    Biggbird Well-Known Member

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    Bank Australia offer multiple offsets if I recall correctly.
     
  13. Ponty

    Ponty Member

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    I don't know if I have clearly explained myself.

    I took my first mortgage out PP in 2013 with an Offset Account attached, but the money did not sit in the Offset Account, it sat in the mortgage account, the bank said that this was ok and would have the same result if the money sat in the Offset Account.

    I took out an IP mortgage in 2015, I did not borrow any money from my PP mortgage to purchase this property.

    And the PP purchased in 2013 has not reverted to an investment mortgage.

    I understand what you are saying about combining the mortgages, and thank you for that. Can I refinance the PP that I am now living in with some other financial organisation, is that possible, and keep the first property purchased with the current bank?
     
  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Your wording is vague, so not sure what you are saying.

    Did you borrow against your main residence and put that money into the offset

    or

    Did you borrow to buy the main residence?

    Yes you could refinance as loan as the loan is less than 80% of the value of the property (or even more in some cases) - as long as you qualify.
     
  15. JasonC

    JasonC Well-Known Member

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    Ponty,

    Can you provide a concise timeline of:
    • When you bought each property and where the money came from to purchase it (ie. cash savings/loans)?
    • When each property was available for rent and when you were living in each?
    • Any later extra repayments/redraws that you made into the home loans after they were established?
    • Current loan/offset balances?
    Try not to use property A and property B rather than PP/IP.

    Then someone maybe able to provide some sensible guidance.

    You seem to be asking a lot of "wrong" questions in your (ie. can I combine my loans? Answer yes. Should I combine my loans? Almost definitely not)

    Do you do your own tax return, or have you an accountant doing it? Your loan interest deductions could be a mess.

    Regards,

    Jason
     
    Last edited: 9th May, 2020
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  16. Archaon

    Archaon Well-Known Member

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    Property A (Previous PP, holiday let and now IP)
    What is the loan balance on this property and is it worth 750,000?

    Property B (previous IP and now PP)
    Is the loan balance of this property 450,000 with a value of 570,000?
     
  17. rhinsor

    rhinsor Well-Known Member

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    I have multiple offset accounts for additional security and privacy reasons.

    You don't want to allow a company access to remove funds to pay bills then if something fails they could drain your account. Happened a few times over the years.

    If you need to give someone a copy of accounts statements you can select with offset if relates to so they don't see where you are spending and where your income comes from.

    Also a dumping offset. If someone transfers you money for any reason you can grab it and transfer straight to another account.
     
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  18. milobear

    milobear Well-Known Member

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    Just refinanced with Westpac, anyone can confirm multiple offset is available?
     
  19. SA-Investor

    SA-Investor Active Member

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    with banksa (same group) they are - unlimited (or up to - on the package

    you get 1 free one (without any requirements)
    1 thats free if the loan payments are taken from it (so that can be a different one to the one used as the free one)
    then all others are free as long as the minimum monthly transactions are met, think thats $2k per month (i just auto transfer that in/out from my main account if its one that isn't getting regular flow otherwise)
     
  20. Ponty

    Ponty Member

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