Keep $$ in an Investment Home Loan Offset Account OR Buy Shares

[Tansam]

My wife & I have paid off our principal home loan and we have some surplus money of around $120K in our Investment property home loan Offset account. I was wondering if it would be wise to draw these funds out and buy shares with it. The investment property is at break even (ie. not positively or negatively geared) and we don't really need access to those funds in the short term. That money is offsetting interest of 5.6%. I would pay personal tax at the 2nd highest tax bracket as I am full time PAYG employee.

I was thinking of taking say $80-$100k and buying some quality stocks, either in the ASX or the US market like Nvidia, Alphabet, or Microsoft. I know the dividends i receive may not be as high as the interest I am offsetting on the investment home loan and there is tax I would pay on the dividends. This would mean I would perhaps be in a negative cashflow position, but I would do it in the hope that the value of these shares increases.

Does anyone have any thoughts on this strategy of taking money from an investment offset account and investing it in the share market?

 

[Joe Blow]

Hi Tansam, welcome to ASF.

Unfortunately you are asking for specific financial advice, and it is illegal for anyone other than a licensed financial advisor to provide such advice.

It is possible to discuss the pros and cons of particular investment approaches or strategies in general, but not to ask for financial advice that is specific to your personal circumstances. If you need advice or guidance regarding your investments then you should seek professional financial advice: https://asic.gov.au/regulatory-resources/financial-services/financial-advice/

 

[Tansam]

Hi Joe thanks for your msg. Am just weeding out the pros and cons but not after any advice here.

 

[divs4ever]

Hi Joe thanks for your msg. Am just weeding out the pros and cons but not after any advice here.

some Aussie stocks that pay franking credits ??

run that by your financial adviser/accountant , first

maybe it would suit you

please be warned even the best stocks can go down sharply , so don't forget the risk of a capital loss

 

[Knobby22]

some Aussie stocks that pay franking credits ??

run that by your financial adviser/accountant , first

maybe it would suit you

please be warned even the best stocks can go down sharply , so don't forget the risk of a capital loss

Yes. Agree. Franking credits are worth it.
Maybe some ETFs for overseas if you really want to.

I am for it as it helps educate you for the future.

 

[Value Collector]

My wife & I have paid off our principal home loan and we have some surplus money of around $120K in our Investment property home loan Offset account. I was wondering if it would be wise to draw these funds out and buy shares with it. The investment property is at break even (ie. not positively or negatively geared) and we don't really need access to those funds in the short term. That money is offsetting interest of 5.6%. I would pay personal tax at the 2nd highest tax bracket as I am full time PAYG employee.

I was thinking of taking say $80-$100k and buying some quality stocks, either in the ASX or the US market like Nvidia, Alphabet, or Microsoft. I know the dividends i receive may not be as high as the interest I am offsetting on the investment home loan and there is tax I would pay on the dividends. This would mean I would perhaps be in a negative cashflow position, but I would do it in the hope that the value of these shares increases.

Does anyone have any thoughts on this strategy of taking money from an investment offset account and investing it in the share market?

Is your investment property loan on principle and interest payments?

basically the way I would make the decision for myself would be by looking at the following.

1, If I keep the money in the offset account, I am reducing the interest on the loan, but therefore increasing the principle payments and paying the loan off faster, which means the property will become positive cashflow faster.

2, if I take the money and invest else where the investment property will continue paying itself off just at a slower rate, but I would have more cashflow coming in from the franked dividends, that can be used to continue to build your share portfolio.

on a side note do you understand what franked dividends are and how they work? (sorry it seems like a simple topic but you would be surprised by how many people don’t understand them)

 

[Tansam]

Is your investment property loan on principle and interest payments?

basically the way I would make the decision for myself would be by looking at the following.

1, If I keep the money in the offset account, I am reducing the interest on the loan, but therefore increasing the principle payments and paying the loan off faster, which means the property will become positive cashflow faster.

2, if I take the money and invest else where the investment property will continue paying itself off just at a slower rate, but I would have more cashflow coming in from the franked dividends, that can be used to continue to build your share portfolio.

on a side note do you understand what franked dividends are and how they work? (sorry it seems like a simple topic but you would be surprised by how many people don’t understand them)

Thanks, I'm trying to streamline the numbers to see how much better/worse off I'll be but I like what you say about building the share portfolio