My parents helped me buy a house - should I pay them back first?


Cassandra: I am 42 and have just bought my first house. It cost $543,000, for which I fixed $434,000 and my parents went guarantor for a variable $93,000 of it. I have $47,000 in an offset account.

Do I put the $47,000 into the $93,000 to get that paid down or do I keep it in the offset account?

My priority is to pay off the guarantee loan in five years. I salary sacrifice the smaller loan.

I am keen to look at investing once I have paid out the smaller loan.

my parents helped me buy a house, should I pay them back first? deposit guarantor

Paul: Congratulations on buying your first home and also your commitment to saving - $47,000 in your offset account is a great effort.

I also admire your plan to clear out the variable part of the loan and free your parents from the guarantee.

But I don't really think it matters how you save. Your offset account should be the same rate of interest as the variable loan but you do have access to the money in the offset account.

Check with your bank but I don't think there will be any difference whether you save $93,000 and pay off the variable part, or simply pay more into the variable part of your loan.

The key issue in terms of building future wealth is that you do what you are doing now and stick to a disciplined savings plan.


Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Got a money question? Ask Paul.
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