July 18, 2017
Make the most of your offset account
When it comes to buying a home or refinancing you will need to consider what features you would like to have in a home loan….
There are lots of features to home loans and your broker is here to walk you through the options available.
If this is your first home loan then words like ‘redraw facility’ and ‘offset account’ may be all new to you.
So you may be wondering what these home loan features are, whether or not you need them, how much will they cost, and how you can use them to your advantage.
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 - you have $30,000 in your offset account and your Home Loan Balance is $500,000. The money in your offset account ensures you only pay interest on your daily home loan balance less the amount in your offset account. So in this case the interest will be calculated on balance of $470,000 (Home Loan Balance $500,000 less Offset Account $30,000).
With a substantial amount held in your offset account you will save considerably on interest costs and the period of time to repay your loan.
Which home loan products come with an offset account?
Offset accounts are generally offered with a “bells and whistles” type loan. This loan is generally offered as part of package, including other general banking products with that institution. There is usually an annual fee to become a package holder (that could be as much as $500).
In basic terms, if you do not think you can have a regular sum of money saved in your offset account, then you might be financially better off with a basic home loan rather than full feature loan.
You need to be sure that the savings you earn from your professional package outweigh the cost of the annual fee. As your mortgage broker we are able to help you calculate the savings based on a variety of scenarios. Meetings and consultation with a mortgage broker is free of charge
How to get the most out of your offset account
To make the most of your offset account you need to maximise the balance of this account at all times. Direct all income to credit this account. Minimise the debits to this account by paying bills on a credit card and paying your credit card in full at the end of the period. Save funds for holidays, school fees, renovations in the offset. If you need any other suggestions in managing your accounts speak with your broker, we’d be happy to help
You might also be interested in: