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Should I pay off my mortgage or leave it in my offset account?

I’m confused – my bank teller is telling me to transfer my savings onto my mortgage but you are encouraging me to leave the money in my offset
account. Isn’t the end result the same? Why am I being told something different from the bank?

Great question!

Besides the obvious answer that the banks would prefer the security of having your savings pay off my mortgage, most home owners understand that regardless of the approach you adopt, interest on your home loan is calculated on the same basis. Some believe the only difference between paying off your home loan account and placing your savings in an offset account is the flexibility of having easier access to your savings by having it sitting in your off set account. This flexibility of instant access however, is negated if you have a redraw
facility on your loan account.

While the interest savings are the same, there may be very different tax considerations, particularly if the property is for investment purposes or going to be used as an investment in the future.

Just because the loan is secured by an investment property, it does not mean that all interest payments are deductible for tax purposes if you redraw on the facility.

Your ability to claim a tax deduction for interest on the total loan is determined by the purpose of use of the borrowed funds.