Parking alot of money in an offset account

Hi all, checking for pitfalls and trying to anticipate problems.

1. I have a loan for 400k on a beach house that is currently rented (currently fixed - prepandemic ;-(
2. I have savings in an offset account against a loan for ETF holdings, and am getting a payday from a sold property.
3. My plan is to remove the savings and the freed up equity (total 400k) and put into an offset account on the beach house rather than pay off the beach house. We would then use the beach house for the family.

I am doing this as we might want to return to use the beach house as an investment property in the future - and the equity would then be availble for other things - e.g. deposit on another IP, or a loan to a child - and the remaining unpaid loan would be tax deductible.

I know I will be paying a $4k break fee. Apart from that is there any danger that my lender will be upset about having 400k in an offset account against a 400k loan (I will pay $120 per year with the offset). Any ATO issue with not claiming deduction and then in five years switching it back on.

I can see a risk that only $250k of the offset is govt protected (tic toc loans)

Much appreciate hearing any concerns about my plan.

Thanks

 

You will have a debt equal to the loan so none of it is protected.

Consider breaking the loan while the tenants are there so you can potentially claim the break costs.

Tax Tip 29: Timing the breaking of fixed loans Tax Tip 29: Timing the breaking of fixed loans

Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest
Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest

 

Thanks Terry. So creditors could take the 400K and we would lose it, or tic tic could close out the loan and I would own the property with no free equity. Presume the latter.

 

If the lender failed the the debt you owe the bank is the debt they owe you so would essentially cancel each other out.

 

Another 17 months

 

You aren't doing anything wrong so don't sweat, not good for the lender, and that's not your issue.

If you used a broker they will lose trial on a fully offset loan.