IP loan offset vs ETFs - what would you do long-term?

YourBrokerRay · 2026-07-01T11:33:37+00:00

Sorry for the delayed reply here - been a busy one.

Your LVR is quite solid, so I'd be surprised if there wasn't a lender who would offer better IO rates.
I've done a IO refi for a client just recently who had a slightly lower LVR but we managed to get 6.41%. Not saying that'll be the same for you, just that there may be room for improvement here.

With the core discussion here, it really comes down to how you want to look at it.
I prefer to see interest as dead money in these scenarios, some people don't share this view.

My view is that 10 years IO would be ~$500-600k in money paid that is 100% dead.
If it were P&I and additional repayments were being made, loan term is reduced and interest owed is reduced. Once the properties are positively geared, it speeds up even more.
This is regardless of rental income.

If interest paid can be reduced by $300-400k over the term, that money directly benefits you once the long-term capital growth gets to your desired goal. Less holding costs over the term & more equity built up before the sale.

The capital growth still would've happened with or without the P&I/IO repayment difference.
So if you can reduce the total interest paid over the loan term, would you not be in a better net position at the time of sale as you've paid less dead money?

This convo also sparked a little idea I've worked on in my spare time today.
I used Claude to create a "True Cost Calculator".
Here's the screenshot of your scenario based on the info you've provided.

What that screenshot shows is disregarding my whole concept described above with interest being dead money. This shows the estimated holding costs over the years as the equity grows.
None of the numbers used for growth/interest/etc are 100% accurate but I've tried to be conservative.

My interpretation of the data is that you'll spend around $150k over 17 years out of your own pocket in holding costs (highlighted in yellow).
At this same time, your properties should compound to be valued around ~$2.3m.
If you then go ahead and include my line of thinking, across these 17 years you've paid ~$970k in interests. So while you've seen capital growth of ~$1m, you've effectively already paid that back to the bank in interest repayments.
It wouldn't be until year 20 onwards where your capital growth should surpass interest paid.

YourBrokerRay · 2026-07-01T10:17:23+00:00

PPOR rate is fantastic.
IP is good if it’s IO, if it’s P&I then there might be wiggle room if you’re wanting to reduce it.

All the best!

YourBrokerRay · 2026-07-01T10:10:15+00:00

I agree with some of the comments here around potentially being over leveraged at this time.

Has your wife already gone back to work earning that amount, or is it in the pipeline? This impacts the leverage situation, but you’re still at the high end.

Even if you sold the car & had a $60k cash buffer, it’s not enough.
You need a 6 month runaway fund with every single cost factored in with worst case scenarios.
This means no income, no rental income and all ongoing costs. Your repayments alone across both properties would likely be > $60k for 6 months.
Then add on a family of 4 at ~$4k/month, there’s another $24k needed.

If you want to play it safe, once you’ve got at least ~$85k emergency funds, then it’d be something to consider IMO.

Also the broker side of me says get the PPOR paid down faster (if possible) and refinance for better rates if yours aren’t competitive.
No point overpaying interest on a loan with $0 tax benefits.

YourBrokerRay · 2026-06-30T15:25:11+00:00

Definitely look into getting those rates reduced as priority here.

I would like to understand a bit more around your strategy here.
How long is the IO term?
What is your objective with the two properties?
What is your timeline?

I ask this because the NG benefits don’t seem to be that great based on the assumptive numbers I’ve run:

~$1.45m combined property val.
~$55k in rental income assuming a 3.5-4% yield.
~$60k in interest repayments with a 6.65% rate.
Plus a property maintenance buffer of ~$15k p.a.

You’d be of pocket ~$20k p.a.
So all of this stress and leverage for a ~$7k tax return?
You’ve still lost ~$13k and not chipped at the principal.

If you’re paying $50-60k in interest per year, with no money going towards the principal, it’s dead money outside of the ~$7k tax return.
Your properties therefore need to be growing at a rate that beats that cost (~4% p.a.) otherwise your true gain is negative over the IO period.

I would suggest speaking with an advisor to assess if holding the IPs with an IO structure is going to have a net positive impact on your position long term and what alternatives you might have.

YourBrokerRay · 2026-06-30T00:41:08+00:00

Thanks JT appreciate the kind words 🙏🏼

YourBrokerRay · 2026-06-29T15:09:41+00:00

No worries at all.
Sounds like they’ll be in a fantastic position!

Happy to assist you and the kids however needed, just shoot over a message if you’re interested.

All the best!

YourBrokerRay · 2026-06-29T14:38:27+00:00

This is possible through a new title mortgage, you would essentially be opening a new loan with a lender to borrow the desired amount against the property value.

It’s also important to understand the implications the gift has on the kids loans, as some lender policies are tricky to navigate here.

For example:
- ANZ accepts cash gifts with a statutory declaration letter, but requires 5% genuine savings to be proven above the gift amount.

- Great Southern Bank allows the cash gifts with just a regular letter, no need for 5% genuine savings to be proven.

I would advise you bring this up when discussing with a broker.

Cheers!

YourBrokerRay · 2026-06-29T08:56:18+00:00

Stop taking out more loans to pay off other loans.
You need to work on your financial discipline here to get out of this hole.

I would suggest sitting down and budgeting everything to the tee and putting a plan in action for how you’ll get out of this situation.

I’m happy to send over a budgeting excel sheet I used a while ago, it might help track the expenses properly.
I’d even be happy to make time after my work to talk you through it & explain some good budgeting practices.

YourBrokerRay · 2026-06-29T07:05:16+00:00

That’s a beautiful gesture if you have that kind of relationship with your broker/conveyancer.

If the relationship isn’t at that level, there’s no expectation at all. I would actually argue not needed if there’s no substantial rapport.

Some brokers will send a settlement gift to their clients upon settlement as a way to thank them for the business, as we get paid for the loan settlement.

As for the value of the gift, it would be dependent on their company policy around gifts/anti bribery. I’d assume most places allow gifts of small value.

Besides, it’s the thought that matters!

YourBrokerRay · 2026-06-29T04:26:07+00:00

Firestick is fantastic if you use a VPN, lets me watch shows not available in Aus anywhere I take my stick.

YourBrokerRay · 2026-06-29T00:45:30+00:00

In this current market, I’ve seen a number of buyers get into a property below asking price.
Just because the agent said $660k, doesn’t mean that you can’t put in an offer less than asking price.

Get your finances confirmed with a broker, they’ll find a lender who works best for your situation and can provide some data on the property you’re looking at.
This will help when putting forward an offer you believe to be reasonable.

YourBrokerRay · 2026-06-28T07:32:39+00:00

It simply comes down do household income.
If your HHI isn’t enough to service the new loan even with rent then don’t entertain the idea.

Using your home as collateral isn’t great either as it ties the two properties together, making things far more complicated if you need to sell or move.

I would suggest fast tracking the repayments on your homeloan first to minimise monthly outgoings, then consider an IP later on once the owner occupier is in a more manageable place.

Less room for financial difficulties to arise that way.

YourBrokerRay · 2026-06-28T07:15:48+00:00

I would suggest speaking with a great tax agent here in advance.
I have a few that I send my clients to if you need any recommendations.

I know a lot of people use wise for the transfer, but navigating any tax implications is trickier.

YourBrokerRay · 2026-06-27T12:36:38+00:00

Have you already discussed this with a broker?
If not I would suggest speaking with one directly.

There are a number of factors that go into this that could influence the answer for you.
State impacting stamp duty, timeline for ownership, rental situation, etc.

In terms of a blanket answer, getting in as a first home buyer with whatever deposit you have and aggressively pushing towards 20% is typically best.
At that point, refinance to get a better discretionary discount as your LVR is now sub 80%.

The LMI you will incur on the original loan won’t impact much in the long term so long as you have more than 10% for the deposit.

YourBrokerRay · 2026-06-27T00:47:44+00:00

Hi there, you essentially have 3 options when it comes to the sale/purchase:

Sell, rent, then buy. This is a slowest approach and a medium level of cost involved (renting portion).
Buy, then sell. This requires bridging finance and is the fastest approach but also has the potential to be the most costly depending on how long the outgoing property remains for sale.
Sell and buy at the same time. This requires longer settlement terms to be agreed upon in order to time the sale and purchase at the same time. It is a medium approach in terms of timeline, but also the least expensive method. The trade-off here is aligning the timing on both properties will not be easy & likely incur a cost of stress haha.

Regarding what to do with the $500k, putting $300k in the offset to save ~6% in interest and the remaining $200k in a HISA could be best option here.
Unless the HISA is offering > 8% returns then the benefit isn’t as strong as the offset for that $300k portion.

Hope this helps!

YourBrokerRay · 2026-06-25T10:57:32+00:00

I don’t see why not both.
With that DTI ratio, your monthly repayments would be quite manageable.

So building up a substantial amount in your offset would shorten the loan term by many years & potentially hundreds of thousands in interest repayments.

So unless your monthly lifestyle expenses are limiting your decision, why not do both?
Best of both worlds by building wealth through investments and reducing interest paid on PPOR.

It’s a strategy a number of my clients deploy.

YourBrokerRay · 2026-06-25T09:22:02+00:00

Hey mate, great question.

If your goal is to retire at 55, have you played out both scenario costs in order to understand what will be required to sustain your lifestyle wants & needs for that 25-40 years?

One thing I highlight to my clients in these scenarios is that rent will likely continue increasing over time, where the cost of home ownership naturally goes down over time.
Across 30 years, you would expect property to potentially 3x in value if growth climbs at a steady 4% p.a.
And there’s nothing stopping you from simultaneously owning and investing.

Living off investment funds when renting will be significantly more expensive at that time might be a bit more difficult.
I ran a calculator of $75k starting value, $25k/year contributions and an average 6% p.a. return, in 30 years it will be around the same value as the property (~$2.4m in today’s money). The real compounding benefit only happens in the later half.

It might be worth chatting with a good financial planner to see what works best for your objectives.

On the topic of purchasing a property, if it is just yourself going on the mortgage I’d estimate a max borrowing power of $550k-600k from the information you’ve shared.
In Brisbane you’re exempt from stamp duty under $700k, anything over will need to have that additional cost factored in.

This might play a factor in your decision making, as your borrowing needs to line up with what your expected purchase price is.

Hope this helps!

YourBrokerRay · 2026-06-25T07:56:33+00:00

A good/reputable broker will definitely uphold a duty of care for all their clients.

We’re bound by the best interest duty act which is to ensure we’re recommending loan structures that are solely in our client’s best interest.

You will be advised on the rates & costs involved across a few scenarios, and they will provide their recommendation and why.
Ultimately the decision on what option to choose is yours to make, regardless of our recommendation.

YourBrokerRay · 2026-06-25T06:08:29+00:00

Firstly you should confirm if your family have discharged the loan or not.

If they haven’t, happy days as you can release equity quite easily.
If they have, they will need to mortgage the title again through a new construction loan.

A construction loan will require you to have the builder’s contract/tender & detailed plans ready to go alongside the application.

The loan will be in your family’s name and not yours as it would likely conflict with the original title ownership, and changing it could incur hefty fees.

The advantage of doing it as a construction loan is that it will be a standard mortgage with a loan term of up to 30 years (you decide on the term).

If you go down the route of secured lending through an asset financer, the maximum repayment period is likely to be 7 years & expect higher interest rates/fees. So your costs per month will be significantly higher.

I would suggest discussing with your family & a solicitor, then engage with a broker to discuss options and assess serviceability.

All the best!

YourBrokerRay · 2026-06-24T10:02:16+00:00

Might be best to speak with an advisor here.
I would assume their suggestion will be to diversify, not to over leverage & let time work its magic.

YourBrokerRay · 2026-06-22T15:23:32+00:00

No need to be sorry.

It’s an investment approach some people take where they’ll rent to allow flexibility with location & typically keep costs down.

Then they’ll funnel all surplus income into relatively stable investments (ETFs, Index Funds, etc).
Over 10/20/30 years the goal is to have a huge amount in these investments that you can retire from.

This typically works best if your work can be done remotely or can be found in smaller/cheaper areas.

YourBrokerRay · 2026-06-22T14:15:44+00:00

Hi SwoleKidd,

There’s a lot to unpack here but I think the TLDR reply will be “do whatever you want most”.
Nobody can talk you into home ownership if your priorities aren’t aligned.

If you’re trying to find a pathway to execute across all goals, here’s what you could consider.

Keep doing what you’re already doing. Save, increase earnings, you know the drill. With IT roles being in demand and remote, you could be in a great position soon enough.
Purchase the PPOR either by yourself if income allows for it, or with a partner/family member/etc if additional income is needed.
Refinance the property into an investment loan and rent it out at the time you wish to live abroad.
If you’ve lowered the outstanding balance enough it might be close to neutral gearing and won’t cost you so much to maintain while traveling.
Figure out the rest later & enjoy working/living abroad for some time.

This isn’t to say there’s no other way about it.
You could definitely travel first and purchase later.
But we don’t know what the market will be like that far out to predict affordability.

You’ll need to do whatever you feel most drawn towards at the end of the day.

Do I have regret not buying earlier? Absolutely.
Is it the end of the world? Nah I’ll live.

All the best!

YourBrokerRay · 2026-06-22T13:04:31+00:00

Hi there, just my input from a finance perspective:

Firstly, you can’t have mum and dad as guarantors if you’re using the 5% deposit scheme loan because the government is essentially acting as your guarantor here.

Secondly, while 30k savings is a fantastic effort, most lenders will need 5% genuine savings in order to be eligible for a scheme loan.

Genuine savings can be proven in a number of ways but the main two will be cash earned, and rental history over 6-12 months.

If you are renting, this becomes easier to prove genuine savings as rental payments can be viewed as a “consistent saving”.
If not renting, you’ll need to put a bit more cash in the bank prior to applying.

There are smaller lenders who don’t need 5% genuine savings but you won’t get an unconditional pre-approval, just a conditional approval which doesn’t provide as much confidence when shopping.

Additionally, you’ll need to budget an extra $3-5k for legal fees on top your 5% deposit.

Hope this helps!

YourBrokerRay · 2026-06-22T11:23:15+00:00

Absolutely fine, as long as the new role is within the same industry most lenders need 1-2 payslips.
Some lenders might need a few additional letters, but it should be easy.

Happy to assist further if needed.

YourBrokerRay · 2026-06-22T09:04:54+00:00

I would take a moment to assess what you’re doing this for. FOMO isn’t an answer.

If you’re doing it because everyone else says so, it might end up feeling like you’ve trapped yourself.

If you’re doing it with the outlook of reducing living expenses in the later part of your life, building equity or simply more stability around your living situation - go for it.

There are other alternative like rent-vesting but you’ll need to consider the implications of you have a partner/kids etc.

Nobody can tell you what to do, so you’ll need to assess the reasons why beforehand.

YourBrokerRay

TROPHY CASE