In our last blog we touched on the fact that fixed rate products don’t allow the use of an offset account this has provoked a number of questions surrounding offset accounts.
What is an Offset?
- An offset account is a transaction account linked to an eligible home or investment loan. The money you have in this account could offset the amount you owe on that loan, and you'll only be charged the interest on the difference.
Do I need an Offset Account?
- There are a number of different reasons why offset accounts are set up the main one generally however is to save on interest charged. If you have a decent amount of savings it may be worth placing it into an offset account to in turn offset it against an already outstanding loan amount.
Pro’s and Con’s
- The major advantage of an offset accounts is the chance to effectively cut years and thousands of dollars from your home loan. Having your salary deposited into your offset account each payslip may be a beneficial way to manage money along with continue to offset interest paid on your outstanding home loan. You will also have unrestricted access to your money that you deposit into the offset account.
- Offset accounts do however have a fairly hefty annual fee ranging from $300 - $400; this may be a turn off for some people.
- Offset accounts can be very beneficial if used and set up correctly, however not everyone will need an offset account and in many cases they can be an unnecessary expense for people.
Your Mortgage Choice broker can assist you in reviewing current financial position. If you need any assistance in this matter please don’t hesitate to call us on 02 9358 4855. Book in a 15 minute chat with me today: https://calendly.com/adambroughtonmc