Ask Paul: Should I put my inheritance into offset or save up to buy another property?


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Q. I am a 32-year-old with a great job and potential for wage growth. I earn $85,000 and own an apartment.

I have about $210,000 left on my mortgage and about $30,000 saved in an offset account. I transfer around $1000 every month into my mortgage.

I will be inheriting around $30,000 in the next six months.

ask paul clitheroe deposit inheritance offset

Should I put the money towards my mortgage or should I look at buying another property? Or should I look at investing in the stockmarket?

I am clueless when it comes to shares and similar investments, so I wouldn't even know where to begin. - Pam

A. Here, Pam, we have the classic risk-and-return dilemma. Paying off your mortgage by adding to your offset account is a really sensible and super-safe option.

Gearing up and borrowing money to buy an investment property offers more risk but potentially higher returns.

The best way to minimise risk in property is to borrow less and have a long-term time frame.

So with a falling property market in most parts of Australia, it seems to me you could do well to pop the inheritance into your offset account and keep adding the $1000 a month.

This will turn into a large deposit, so if you want to buy another property you can do so more safely.

You also mentioned your prospects for a higher salary - in time that would allow debt to be paid off more easily.

I chuckled at your honest comment about shares. Do remember, though, that you will hold shares in your super fund.

I'd suggest this is a good time to check your super, make sure it is in a low-fee fund, ensure any insurance in the fund is what you need and take a look at the shares the fund owns for you.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.

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