Fantastic point on 'should work 2 jobs', how you'd rather work that at 35 than 65, I'm 26, currently (and will continue) to work 7 days a week, 5 days at the office & 2 days at the supermarket, it can get rough but it's gaining me heaps of money atm & that'll get put into real estate ASAP, so that asset will outpace any salary increases at the office & any more minimum wage increases at the supermarket in the future
Hi Ravi - Does both the strategies (extra repayments and fortnightly payment) only work for Principal+Interest loan or they are as effective for Interest only loans as well?
I had a discussion with a friend about adding 1k per month into an offset account AND parking 2k spending budget in the offset account as well since interest is calculated daily. Then, draw down on the 2k over the month to progressively pay bills. He says the maximum savings that can be made is equal to the interest offset on 2k over the life of the loan, but I think it would be more than that but not sure how to calculate it. Thoughts?
I love Ravi, but he did actually mess up pretty significantly here.. The entire reason you save more on interest is NOT because you're paying more regularly, but actually because you pay more in general. Because 1 month does NOT equal 4 weeks.. theres a few days left over... across a year that equates to 4 additional weeks -> that equates to 2 additional repayments.. hence the interest saved... Doing the calcs of yearly repayments based on the numbers he used: 58.45k~ in yearly repayments going FORNIGHTLY.. 54k~ in yearly repayments paying monthly... Bit of a mistake from Ravi on this one. There is virtually no difference in paying monthly or fortnightly - yes the interest is calculated daily but when paying monthly - theres a 2 week period where you are AHEAD in repayments compared to going fortnightly... then a 2 week period where you're behind... it equals out. I'm a bit surprised by Ravi on this one tbh but everyone makes mistakes, I still think he makes great content.
You can use repayment calculators online. Aussie repayment calculator is the closest one I know. You get to adjust info to your situation eg interest rate, loan term, extra repayments etc. Shows you all these things from what I notices. Time saved due to r Changing from monthly to whatever, amount saved in interest etc for every change you make. It's very helpful
@@MZ-ud3od Thank you! I really did find this video helpful and the differences on the calculations when you increase the frequency (i.e.: Monthly to Fortnightly) improves the situation.
Ravi, what about if you make all those extra payments and then you are in a position where you need to move in five years? Then your savings would not be the same amount. Right? As the interest charge stops and your only benefit would be the cash value applied as equity. Therefore in a 350k loan I would have added a few thousand towards a 350k balance. So instead of carrying X in equity towards the next property, I would be taking X+5K. Is that a correct assumption?
Hey ravi, loving the vids mate. Have you got any recommendations for good moratge calculators that allow you to put in multiple variables at once like offset savings and extra repayments at the same time? I cant find any that allow that function. Any tips to help calculate that if not?? Cheers for your time🤙
When I asked chatgpt and it said it's basically the same. If you put 50k to pay off the house or 50k in the offset account the amount saved is the same. I think the main difference is that you can use the offset account. This might make it tempting for some to use it or alternatively might be a lifesaver if you have an emergency (such as losing a job).
Hi Ravi, Does changing payment frequency change the calculation if your repayments come from an offset? Because the offset reduces as the loan reduces? Not sure if this is a stupid question.
I think he means to leave the offset account at 20k plus small top ups as a way of having a long term savings. The extra repayments on the loan come from your home day-to-day savings or a side hustle. I hope this answers your question. The purpose of having an untouched 20k in an offset account means to the bank that you have solvency and it helps reduce your interest rate deductions as it counts as a repayment even if is not.
Hmm I just tried this using the Bendigo home loan calculator for my own mortgage and it only reduced my interest by $700 for the life of the loan? It only reduces by a lot if your making extra repayments so I’m not sure what calculator your using?
If for example I had 100k, wouldn't it be wiser to re-invest it rather than have it sit in my offset for 20+ years only to save 3x its value in interest?
You're better off paying off your loan and then redrawing that amount to use for investments and you can then claim the interest as a tax deduction. It's called debt recycling
If you calculate the investment at a 7% yearly growth rate, it won't be too much different by the end of the loan term. I suppose its the matter of whether you want that cash readily available or not.
Buy yourself an automatic coffee machine at home and dont go to a cafe multiple times a day to buy the expensive bathwater. Do this and watch your wealth rise. I have!
Not everyone is knowledgeable on these topics. Videos like these are what get young people and those who have no clue about where to start curious and interested in house ownership 101. Helps people avoid basic rookie mistakes that end up costing them a lot in the future
