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Q: How do interest only periods work, if I've been putting money into an offset account, when the interest only period is over do they just charge you principle and interest on the difference between what's in your offset account and the loan amount?
A: Hi Zoe
Yes. They will charge you P&I on the balance owing on your mortgage. So as in Nicole's example if you have $500k mortgage and $100k in your Offset Account then interest is calculated on $400k regardless of whether you pay interest only or Principle & Interest. The only difference is your repayment will increase because you will be paying principle as well as interest. It is interesting to note though, that you be able to re negotiate another interest only term. Who is your lender? Did you use a broker? If so get hold of them. If not then email or call me and I'll help you. Kind regards Andrew 0413 105 822 or andrew@myfinancepeople.com.au
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Q: Hi there. Trying to work what makes more financial sense over a longer period ...paying out a higher interest personal loan with withdrawing cash currently sitting on my house mortgage OR leaving the $$ on the mortgage? The interest rate is 12% v 4.95%
A: I think you have answered your own question here. Get rid of the higher interest rate loan. You could use a separate split on your mortgage for the loan you are paying out which give you the ability to track your progress on paying it off. If you keep up the same level of your current repayment you won't incur long term interest accumulation. If you're need help let me know. Kind regards Andrew
