Need Help on Calculating Home Loan Interest

dcep on 08/07/2017 - 19:16

How much extra interest I'd have paid if I didn't offset the amount of $127k for a year ?

Say i borrow $270k then a year later i put $127k into offset account.

How much extra interest that I've paid through P&I repayments over a year, versus having $127k in offset acct right on the 1st day of the loan ?

Thanks.

Financial

Comments

  • Baysew on 08/07/2017 - 19:33

    Try ANZ 100% Mortgage Offset Calculator

    Other loan calculatorson the site as well. Other lenders probably have similar.

  • Qroozn on 08/07/2017 - 20:06

    $127,000 x interest rate = interest you would have otherwise paid.

    So 10% = $12,700
    5% = $6,350.

    I

    • toristo on 08/07/2017 - 20:08

      Assuming it's a variable rate with 100% offset. If you have a fixed rate, just check as it may only be a partial offset (in which case, you're possibly better off parking your cash elsewhere)

  • wei13 on 08/07/2017 - 20:12

    Assuming its a 100% offset account, then $127k offsetting a 4% loan would save about $5080 in interest a year. If its an investment property you'd have to consider the tax deduction you get with that interest.

    Given current conditions, for owner-occupiers, it would almost always be better to put extra money in an offset account than a savings account (interest earned are usually taxable too).

    • dcep on 09/07/2017 - 12:42

      Thanks. Didn't know it's that straight-forward.

      Does it apply the same to the 2nd year, or does the compounding interest formula kicks in from 2nd year onwards ?

      • conan2000 on 10/07/2017 - 00:25
        -1

        It's the same the second year. Assuming same value of money in the offset account x interest rates.

      • tsunamisurfer on 10/07/2017 - 13:29

        Its not that straight forward.

        There is a compounding effect of the offset amount, that $127k of principal that is now interest free means most of your repayments would go to principal instead of interest. This leads to a significant shortening of your loan term.

        The calculation itself is a bit difficult but the easiest way to determine is to use any good mortgage offset calculator. Put the correct values for 1 calculation then note results, then repat the process with zero offset then compare the difference.

  • spackbace on 08/07/2017 - 20:14

    https://www.ozbargain.com.au/node/314338

    This all feels like we're helping someone with their school assignments

    • retiredfeline on 08/07/2017 - 20:16
      +3

      It's a new career.

      1. Set up a home loan advisory service.
      2. Client asks question. "Let me get back to you on that."
      3. Post question to OzB.
      4. Give answer to client and collect fee.
      5. Profit.
      • dasher86 on 08/07/2017 - 23:15

        I still think it's more profitable to sell bikies introduction services to OzB.

  • HeWhoKnows on 09/07/2017 - 17:55
    +1

    Plenty of apps and online tools to do this

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