Offset vs extra repayments

Hello,

Could I please check that my understanding is correct here - that I will I save the same amount of time and interest on my PPOR loan, whether I:

1. Make extra repayments toward the loan itself or
2. Put the extra repayment $ into the offset

... is this correct? I.e. same outcome for both approaches?

Note, I'm aware of that there are advantages to the offset should I want to turn the property into an IP in future.

Many thanks!

 

Yes

But if you are a spender paying into the loan might actually save you money if you would otherwise be tempted to spend the offset account money as it increases.

 

Logistically same thing on saving interest. But for furute taxation purposes..I think you know.

 

Depends, normally fixed loan offsets are 40% and variable 100%

 

I wouldn\t say this is the norm. Normally there are no offsets on fixed. I think one lender offers the partial offset, can't remember who.

 

The dragon

 

This is 100% offset.

 

I prefer using an offset account over making extra repayments into the home loan as I can have my salary go straight into my offset account and that will help me save interest from day 1 until I need to pay my expenses.

I wouldn't put all my money into my home loan whereas I can put all my money into my offset account.

 

Bankwest

 

Offset > Extra repayments all day every day, as long as you're disciplined enough to not spend the money in the offset as it builds up.

 

Yep it varies, some lenders will even let you have 100% offset accounts on fixed loans but most won't allow it at all and others only allow a smaller % as mentioned by others.

 

Most lenders don't even allow 40% offset on fixed rates anymore. Actually most never did.