Why you should not pay off your mortgage

Hi, I have almost saved enough money in my offset account to fully pay off my home loan. I have $370,000 in the offset and the loan is $385,000. I expect to finally reach equilibrium by the end of the year. Should I pay off the loan and be debt free? 

First of all congratulations! That is a mammoth achievement and cause for celebration. It is an amazing feeling to be almost debt free.

Leaving the money in a 100% fully offset account is almost the same as having paid off the loan as you are no longer paying any interest on the amount owing.

If you pay off your loan, you no longer have easy access to that money. If you need it for emergencies, then you will need to apply for a new equity loan with the bank and whilst that might not take that long given your financial circumstances, it is still an extra process and you are back at the mercy of the banks to approve your loan and your loan amount. Your bank may not agree to loan you back the same loan size you had previously.

You could choose to use the money to buy a new investment property, or upgrade to a new house and use the current property as investment. Or you could use it to invest in other assets like the stockmarket. The amount you expect to make though should be more than the interest rate of your loan after tax. No point making a 5% return and getting taxed half of it, only to have to pay a 4% interest on your home loan that would have been otherwise there if you had left the money in the offset.

Cash is always king. Leave it in the offset account for maximum flexibility.