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Term Deposit or Offset

Discussion in 'General Investing Discussion' started by sarmaya, 26th Sep, 2012.

  1. sarmaya

    sarmaya New Member

    Joined:
    26th Sep, 2012
    Posts:
    1
    Location:
    melbourne
    Hi everyone, my first post here and looking into some advise on what to do.

    I have a loan under joint name with my Dad and we are paying half each, we have $210,000 mortgage at the moment. I have some cash which is in a term deposit account at the moment and earning around 5.5% interest, my tax rate is at 37c per dollar. The interest on the term deposit is taxed at higher rate and I pay too much tax and I think I could use this money to offset the home loan. I don't want to pay off this loan as it's a shared loan and all the siblings live in the house.

    What would be a better option, buying an investment property for myself and paying a deposit towards that, what percentage should the deposit be to maximize my savings on not pay too much tax?

    Move the money into an offset account and offset the existing mortgage?

    I don't have any immediate plans as to what I want to do with the cash apart from buying a new car which will still leave me with enough funds to do whichever of the above.

    As you can tell that I am a complete newbe and appreciate any help.

    Thanks
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Thats the trouble with joint loans.

    I would suggest you do the sums.
    1. How much interest would you save by putting it into an offset on the home loan.
    2. How much income after tax on the term deposit.

    3. If you buy an investment property.

    Ideally you would want to use your cash to pay down the home loan and then reborrow to buy the investment property as this will increase your tax deductions. It will also help you and dad out by decreasing the non deductible loan.