Variable Vs Fixed Offset - Heritage

umonroe on 21/11/2017 - 08:51
Last edited 21/11/2017 - 09:20

Hi Everyone,

Having some trouble with Maths/understanding banking terms… How do you work out saving when catering for an offset account? Has someone got a spreadsheet or something I can use?

What I would like to do is have:

-a Credit Card for day to day purchases,
-an offset account where my pay goes into and works against the mortgage,
-a low interest mortgage.

What I am unsure about is whether to go Fixed or Variable,

Fixed @ 3.96% (1 Year):
EDIT: 3.89%
$5000 or less = 1% off up on $5000 in the mortgage
$5000 or more = 1.6% off up to the same amount off the mortgage
I can also put as much money on the mortgage as I want and withdraw at any time (paperwork, no card) which also lowers the amount of interest I am paying.
So Heritage says it IS possible to achieve full offset even though its a bit convoluted.

Variable @ 4.06%:
EDIT" 4.09%
Offset account is fully offset, and debit card included
Quite simple, but at what expense am I getting this convenience?

I cant work out which is better, specifically when it comes to the Fixed option, if anyone could assist a little I'd really appreciate it.

Financial

Comments

  • Hellfire on 21/11/2017 - 09:11

    Those rates don't look that good. I'd shop around if you are really keen to save money.

    • umonroe on 21/11/2017 - 09:22

      Whoops I got them wrong, updated.

      Still doesn't change your comment. I will see what else is out there. Thank you for input :)

      • tomsco on 21/11/2017 - 10:29

        I'm with State Custodians. Their website is ugly as sin and the offset can only transfer to one linked account, but at 3.69%, I'm not too worried about that.

        It does also come with a debit card linked to the account.

        • umonroe on 21/11/2017 - 15:45

          Hi, what do you mean "offset can only transfer to one linked account"? So i assume it would be linked to the Mortgage no? Do you use Credit Cards during the month and have you income in you offset, and then pay CCs at end of interest free period?

        • tomsco on 21/11/2017 - 15:48

          @umonroe:

          what do you mean "offset can only transfer to one linked account"?

          If I wanted to transfer money to someone, I couldn't. I would need to transfer it to a linked transaction account with another bank, before transferring to the 3rd party (ie. My SC account > my NAB account > 3rd parties bank account).

          In saying that, you can BPay from the offset account, so it's not often I have an issue with this restriction.

          Do you use Credit Cards during the month and have you income in you offset, and then pay CCs at end of interest free period?

          Yep, that's exactly what I do.

  • idontalwaysnotlie on 21/11/2017 - 09:56
    +1

    Still dont look great, Shop around a bit more and you should be able to get a variable under 4% with offset.
    My advice is to go with the best rate possible, as most of these packages that they offer you dont really need and maybe save you $400/y in fees but charge you $200/m in extra interest.

    • umonroe on 21/11/2017 - 15:44

      Ok, great. I will look for someone with free offset. I thought the Package was standard practise. Thanks for the advise :)

  • dasher86 on 21/11/2017 - 10:22

    Do not pay a 'package fee'
    You can get loans with free offset accounts
    You can always apply for a credit card outside of your mortgage for free.

    • umonroe on 21/11/2017 - 15:43

      Hmmm thats a good point. They made me get the credit cards first before I could sign up to the new mortgage "Package", $300 a year….. not annual fee on CC but no Qantas points either :( so I think you might be onto something here. I will do a bit more shopping around. Definitely not a fun process.

  • one man clan on 21/11/2017 - 10:44

    I know you're asking for advice specifically but have you been to a mortgage broker? I had a good experience with mine and you can always double check by doing your own research. It's free (they get paid by referral) and they have some capacity to negotiate.

    I ended up with a mixed variable/fixed loan with 100% offset that's worked out well.

    • umonroe on 21/11/2017 - 15:41

      I used a mortgage broker when I took out the mortgage. Was happy at the time, but now I'm wondering why they didnt suggest an offset account….? I was on a discount variable (and have been for 5 years) and am only just getting around to reassessing it.

      Does everybody do this annually?

      • one man clan on 21/11/2017 - 16:39

        Ah fair enough. I was aware of offsets and their benefits at the time and pressed for one.

        I don't think people do it annually (because the hassle of changing over all your direct debits and credit cards is extremely tedious) but I'll probably have a look in a year (3 years of mortgage).

        • umonroe on 21/11/2017 - 18:52

          Yeh, bit of a bugger that I wasnt aware. You live and learn. Got another child on the way so wanting to get the finances sorted out before my wife stops working.

  • umonroe on 21/11/2017 - 15:39

    Thanks everyone. My mortgage is just above 200K, so CBA wont transfer me for free.

    Does anyone know a rough total when it comes to changing lenders?

    • tomsco on 21/11/2017 - 15:49

      What interest rate/fees are you paying with CBA? How quickly are you repaying it?

      I could be wrong, but I think early exit fees have been restricted, so you might just be paying the discharge fee which is around $260 IIRC.

      • umonroe on 21/11/2017 - 18:50

        Sorry I wrote that wrong. I am with Heritage. CBA said they could move me to them for free but then backed out because they only do it for mortgages above 250K.

        Paying back weekly, 20 year mortgage.

        Do you know if you have to get your property valued etc to go to another bank? What other costs are involved when refinancing a mortgage?

        • tomsco on 21/11/2017 - 19:43

          Yep. Some banks may do a valuation from their computer, but others will send someone out. Loans.com.au and SC send someone out and both times were in the $200-$300 range.

          Loans had me pay the company up front, where as SC included it in the settlement amount.

    • [Deactivated] on 21/11/2017 - 19:01
      +1

      Does anyone know a rough total when it comes to changing lenders?

      Generally speaking a range of $300-700 in aggregate (total of exit fee + legals/admin + state levied costs) would be typical for a CBA variable loan exit cost. That said, you really must get a quote in writing from CBA directly as it will entirely depend on the loan contract you executed.

      The new lender is obliged to quote their costs of establishment (which includes app fee, legals and valuation) upfront. Generally speaking such costs will typically range from $0-$1000 depending on the lender and scenario. NB: There will also be state based costs to register the mortgage of ~$200-300.

      Hope this helps.

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