@Benny, thanks for the explanation and link, very useful and valuable information.

cheers

zen

“Paying down the principal of a loan simply reduces your access to cash…..”
– you would likely agree with that bit, wouldn’t you? You are replacing the Equity you have in cash with Equity you hold in the house value.

Cash is way more useful, and more readily utilised – whereas Equity in a house often requires taking out a loan again to turn it “back into cash” if needed. If lending became more restricted (e.g. GFC times) and you wanted your money back, would you get it all?

Thus, having cash is much more flexible.

“…. it does not save you money and does not change your risk profile.”

That first bit about saving money should be considered in the context of the alternatives e.g. If you didn’t pay it off the Principal, did you nevertheless “save it” in some other way? An Offset Account allows you to hold cash, while also saving Interest paid – arguably BETTER than paying down the loan, as you retain the cash, thus retaining flexibility.

If saving in an Offset, versus paying off a Loan, your nett position can be every bit as good as if the Loan was repaid (read the post here – https://www.propertyinvesting.com/topic/4410311-the-true-power-of-an-offset-account/ ) and even BETTER given the flexibility you retain.

If any Principal repayments were “Saved” in the Offset Account, you could CHOOSE to use it to pay down the loan at any time. BUT, if you later turned your “old PPOR into an IP”, you would want to retain the WHOLE mortgage, without having had Principal paid off. So softly, softly – use an Offset and sleep well. ;)

And the “risk profile” bit – well, whether you hold Equity in Cash or in excess value above a mortgage, your nett “Assets vs Liabilities” is unchanged, yes?

Benny