So have I got this right?
With a P&I with offset, the monthly repayments stay the same (as with no offset a/c) but the loan is paid off sooner.
But with an I/O loan the offset actually reduces your monthly repayments.
So then I could put the monthly savings back into the offset (increasing the offset and presumably reducing repayments further) and eventually use the accumulated amount in the offset to pay off the principal - effectively the same as the P&I loan. Or, when I sell the property, the extra cash I've accumulated in the offset will equal in value the amount of principal I would have acquired with a P&I loan.
So are the two methods effectively the same (as long as I put the I/O offset savings back into the offset)?
Then what's the advantage of the I/O ... is it that with the I/O I have the choice to pay less in any given month (if I have cashflow difficulties if, say, the property is untenented for a few weeks)? And/or that I can invest the offset cash elsewhere if there's better returns in say, sharemarket?
Finally, for tax, it's only the interest proportion of the loan that is tax deductible, right? So with P&I with offset, I might be repaying $1500pm but only say $1000 would count as tax deductible. With the I/O, the offset would reduce $1500 to $1000, all deductible, so again, effectively the same.
Sorry if these are dumb questions, I'm just trying to get my head around this stuff.