Offset investment vs ppor

Hello,

Should savings be parked into an offset investment or offset ppor.

If it is parked in the investment, does the monthly repayment stay the same, therefore you still get the full benefits of the tax deduction on the interest, you'll just end up paying off the loan faster if the savings stay in the offset.

Or does it act like redraw where the payments decrease.

Or are you meant to manually recalculate the principal loan to interest portion for tax claiming.

 

You should have money parked in the PPOR offset.

 

You should generally have the cash in an offset linked to a non-deductible loan as this will save you more money. Offsetting a loan with deductible interest will result in more tax being payable.

If the loan is PI offsetting will save interest but won't change the repayments - some lenders allow these to be reduced as you get ahead others won't.

If the loan is IO it will reduce the interest which reduces the repayments (as all you pay is interest) so this can greatly improve cashflow.

 

What should one be doing if the rate of interest for PPOR loan is 1.79% vs Investment Loan (interest only) is higher than PPOR @ 3.15%

Is it worthwhile putting the $100k savings attached to PPOR loan and pay full interest on Investment loan or move $100k to investment loan offset, reduce interest payable based on the loan that has higher rate of interest.

 

you could be saving $1360 per year in interest by juggling things around, but whether you should or not will be dependant on a few things so get some tax and credit advice.

this might help
Strategy: Borrow Against the Main Residence for an Investment Loan (Shuffling Loans Around) Strategy: Borrow Against the Main Residence for an Investment Loan