Rise High Investor Weekly Video #54 – Why I love offset accounts

What is an Offset Account?

An offset account is a transactional savings account linked to your home or investment loan. The money in your offset account reduces the loan balance used to calculate interest.

For example, if you have a $100,000 loan and $10,000 in your offset account, you only pay interest on $90,000. This means your savings are working harder for you by reducing your interest expenses, all while staying fully accessible.

Why I Love Offset Accounts:

• Interest Savings: By reducing the balance your interest is calculated on, you can save thousands over the life of your loan.
• Flexibility: You can use your offset account like a regular bank account while enjoying these savings.
• Multiple Accounts: Many lenders allow multiple offset accounts per loan, helping you organize your finances (e.g., separate accounts for holidays, kids’ savings, or other goals).
• Tax Efficiency: For investors, an offset account doesn’t impact the tax deductibility of your loan, ensuring your investment strategy remains effective.

What About Redraw Facilities?

Redraw facilities let you access extra repayments you’ve made on your loan. While they can be useful in some cases, they’re not ideal for property investors.

Why I Avoid Using Redraw for Investment Loans:

• Tax Implications: If you withdraw funds for personal use (e.g., a holiday or paying off a credit card), this could alter the loan’s purpose and affect its tax deductibility.
• Complications: Mixing personal and investment purposes in a single loan can create financial and tax headaches.

Access Restrictions: Some lenders limit how often or how much you can redraw, reducing flexibility.

Which Option is Right for You?

Both offset accounts and redraw facilities have their place, but the right choice depends on your goals:

• For Property Investors: Offset accounts are the clear winner for maintaining tax efficiency, maximizing interest savings, and providing financial flexibility.
• For Personal Loans: Redraw facilities might work better for non-investment loans where tax deductibility isn’t a concern.

Tailored Solutions to Achieve Your Property Goals!

Before deciding, speak to a qualified mortgage broker to design a finance structure that aligns with your goals. A tailored approach will ensure your property investment portfolio performs at its best.

If you have any questions or need more tips, reach out— our Property investment advisors here to help you achieve your property investment dreams!