Are you just about to buy your first home and take on your first mortgage?
If the answer is yes, congratulations! Buying a home is a wonderful experience - whether you are buying a place to live in or a place to rent out.
Of course, in order to purchase your first property, you may need to take out a mortgage.
If this is the case, you have no doubt heard words like ‘redraw facility' and ‘offset account' bandied around a lot.
Some of you may be wondering what these home loan features are, whether or not you need them, and how you can use them properly.
One of the most common home loan features is an offset account.
An offset account is a transaction account that is linked to your home loan. All the money held in this account is then used to offset the interest charged on your home loan.
For example, say you have $10,000 in your offset account and you currently owe $500,000 on your home loan. The money in your offset account ensures you only pay interest on your mortgage minus the money in your offset account. In other words, you will be charged interest on a $490,000 loan, rather than a $500,000 loan.
If you have a decent amount of money in your offset account from day one, you could find that it saves you thousands of dollars in interest over the life of your loan.