REDRAW vs OFFSET ACCOUNTS: Which Is Better For Paying Your Home Loan Fast?

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  • čas přidán 21. 08. 2024
  • There’s a lot of confusion when it comes to finding out the difference between redrawing and an offset account and how they affect interest payments.
    Which methods are better for paying your home loan off faster? Does the ATO view them differently when you file taxes? Are there any hidden fees involved in either one?
    In this video, we will break down what makes each option unique and help you determine which one is best for your situation so that you can pay off your home loan faster and save on interest payments.
    ______
    The Lending Lab is a mortgage and finance broker committed to helping Australians get a better deal. Our team works with a range of lenders to find the best loan products for our clients.
    Whether you're looking to buy your first home, invest in property, or refinance your existing loan, we can help you take the next step on your financial journey.
    We understand that everyone's situation is different, so we offer a tailored approach to finding the right loan product for you. So if you're looking for a better deal on your mortgage, send us a message at contact@thelendinglab.com.au.
    ______
    DISCLAIMER:
    This video contains general information, and it’s not tailored to your individual circumstances, goals, or needs. Before you make any decisions, you should get individual advice.

Komentáře • 19

  • @Warlowisnumberone
    @Warlowisnumberone Před 8 měsíci +5

    FANTASTIC, fast and clear video that has explained what the biggest difference is and the tax implication! Been hunting for a clear answer on this for ages. Thank you!

    • @thelendinglab
      @thelendinglab  Před 8 měsíci

      Thank you for the kind words! Glad we helped demystify the tax implications for you 😄

  • @Homebreweroz
    @Homebreweroz Před 9 hodinami

    I have a small existing mortgage at 6.29% currently have redraw facility but looking to have an offset account, Load up the offset with a windfall from an inheritance. Looking to minimise interest payments on the loan but have funds available to invest in the near future

  • @rjtkoh
    @rjtkoh Před 3 měsíci +3

    Thanks that was very clear. Went round in circles with CBA explaining to me and didn’t get anywhere

  • @anthonyroberts7641
    @anthonyroberts7641 Před 6 dny +1

    Does having money in the offset, reduce the length of the loan, or do you have to make a specific payment to the principle?

    • @thelendinglab
      @thelendinglab  Před 6 dny +1

      Hi Anthony,
      Yes, funds in your offset accelerates how quickly your loan is paid down and will mean your loan is paid off faster. We can run the numbers of exactly how much quicker this would be if you have an estimated loan balance and offset balance.

    • @anthonyroberts7641
      @anthonyroberts7641 Před 6 dny +1

      @thelendinglab thanks for the response. Loan just flipped to variable. So I have been putting pay into offset, then use credit card and cash for living expenses.
      Pay c.c in full when due and repeat.
      495k loan, 20k offset. Aiming to build offset as quickly as possible.

    • @thelendinglab
      @thelendinglab  Před 6 dny

      @@anthonyroberts7641
      If you have a mortgage of $495k, let's say you have an interest rate of 6.14%.
      If you have $20k in your offset account, and you increase this by $5k per year.
      You would pay off your home in 17 years and save $475,461 in interest.
      It is amazing what a small change can have over a long time period.
      Hope this helps :)

    • @thelendinglab
      @thelendinglab  Před 4 dny +1

      @@anthonyroberts7641 Sounds like you have a solid plan. If you are wanting to take things to the next level, start having a look into debt recycling. We don't have a video out on it yet, but hope to make one in the future.

    • @anthonyroberts7641
      @anthonyroberts7641 Před 4 dny

      ​@@thelendinglab Will look into it, thanks. Have subscribed for future vids.

  • @wrx111
    @wrx111 Před 7 měsíci +3

    What if i don't have any investment properties owe 300k on home and have 100k cash whats the best thing to do?

    • @thelendinglab
      @thelendinglab  Před 7 měsíci

      Putting your savings in an offset account is still likely your best bet. The interest that you save would still be substantial, and you would shave years off of your loan.
      You don't get taxed on the interest you prevent, but if you place it in a savings account, you will get taxed on the interest you earn.
      If the bank you are with doesn't offer an offset, then it would be worth having a look at your options.
      Hope this helps.

    • @wrx111
      @wrx111 Před 7 měsíci

      Thanks I will look into that.

    • @Rutullll
      @Rutullll Před 5 měsíci

      @@thelendinglab Wouldn't redraw be a better option for PPORs where interest paid are not tax-deductible, but you are saving interest and also annual fees on the offset accounts? Please enlighten.

    • @thelendinglab
      @thelendinglab  Před 4 měsíci

      @@Rutullll , it can potentially be an option; however, if you decide to use your PPOR as an investment if you upgrade or move in the future, you may limit the tax-deductible debt if using redraw.
      We have come across quite a few customers who are now upgrading their PPOR, would like to keep the old one however have repaid a large portion of the debt into redraw, and now they are limited to the interest deduction they can claim.
      The only other reason is generally redraw is seen as the banks money, as this is additional repayments, and offset funds are your money.
      During COVID, a couple of lenders removed the redraw balances from their customer's accounts overnight, removing access to these funds. This is not possible with offset accounts, generally speaking.

    • @Rutullll
      @Rutullll Před 4 měsíci

      @@thelendinglab Thanks for your reply..
      That's scary to hear. I was thinking of turning my property (PPOR) into IP when I move out of it, and it will require to be turned into Investment loan and I would then chose to go for an Offset option.
      Is it still possible?

  • @LA-rp1sj
    @LA-rp1sj Před měsícem +1

    Hi whats my best option,i have $200k ,i want to save as a deposit for house,please what should i do?

    • @thelendinglab
      @thelendinglab  Před měsícem

      If you don't already own a home and are saving for your first home, then a high-interest savings account with a bank is a great option. You get a decent return without any risk.
      If you already own one home and are building your deposit for more, my usual advise would be to use an offset account. It will help decrease your loan balances, creating equity you can use for future property purchases.
      Hope this answers your question :)