What is an offset account?
Home loan offset accounts can help assist by allowing the money you already have in your savings account to reduce the amount of interest you’re paying on your home loan.
For example: if you have a home loan balance of $500,000 and an interest rate is let's say 5% per annum, you’ll pay $25,000 in interest that year. If you have an offsett account with $100,000 in it. Instead of your interest being calculated on the full amount, your savings will deduct your total from $500,000 to $400,000 (your full home loan balance minus the $100,000 you have in savings) leaving you with a $5,000 reduction in interest and just $20,000 extra to pay for the year. Over the life of a 20-30 year loan, even just $10,000 in savings can reduce the loan by years and around $50,000 in payable interest.
When to use a home loan offset
Any lump sum of money you have that is sitting idle in a bank account can be used to help bring down your interest payments. Do you have a holiday fund? or perhaps you’re saving for a new car? Even relatively small amounts of money can still add up to thousands of dollars over the course of your loans lifetime. Even your monthly paycheck can be deposited into your offset account and be helping accrue interest as you draw out sums as required during the month.
How can it work for you
Home Loan offsets are a potentially powerful means of reducing the length of time and amount of interest payable on your loan. With good planning you can set yourself up on a fast track to full home ownership.
To learn more about home loan offset accounts, or if this savings setup is right for you, you can contact Dora and her team on:
Ph: 03 93605968 M: 0413 636 645