I am planing to purchase a block of land to hold for a year and than build on it. Right now with 5% deposit and LMI, CBA is offering me their wealth package as I am an old customer with CBA. How do you suggest me to structure my loan.Since I also want the facility of offset account but they offer it only with variable interest rate. They gave my option for part fixed and part variable with everyday offset being connected with variable. The other thing they mentioned was if I fix all loan than I still can get offset but there is a $50 charge for every withdrawal I make and it doesnt have any limit on the maximum amount I can draw.I fell this option better than the previous or I am missing something. I don't get what would actually benefit me, In future my plan is to release the equity and then buy another IP of course. Can you also please explain me clearly what benefit will I have having an offset account and what implications being there if it is fixed or if its in variable. Thanks in advance
Hi @kerry kerry The purpose of an offset account is as follows: The amount of money held in the offset account is the amount for which you receive an exemption from paying mortgage interest. To put it into perspective, $15,000 in an offset account on a mortgage at 5% interest would save you $62 in interest for the month. So if you only planned to make one withdrawal per month, you'd only get "charged" $50 withdrawal fees and you'd still be on top by $12 since $62-$50=$12. This might be over-simplifying things but hope it helps.
$50 for the privilege of withdrawing your own money if fixing your rates? Sounds like a dud deal to me.
CBA dony have a proper offset account, only redraw hence the $50 charge to pull money out. That was last I asked though which was a few years ago, things may have changed
They have a 100% offset. Back in the day they has the MISA account which was a bit of a pain - but these days they have a proper offset.
Think carefully about fixing a land loan. When building - you generally want to maintain flexibility.....and you won't have that with a fixed loan. Cheers Jamie
I've been looking into some of the CBA offset accounts and it looks like they still have the MISA account available. I'm about to go 50/50 fixed loan with CBA. Am I correct to assume I can offset the variable side of my loan with the Everyday Offset account and then offset the fixed component with the MISA account? Seems like a great deal?
I suggest not holding the land for a year. do both the house and land together. the land is very unlikely to have more capital growth than a house and land will, certainly not enough to offset the holding costs for 12 months. Do both together and manage the risks of a valuation shortfall, the build being more expensive than quoted, the lending environment changing, or your personal circumstances changing.
