100% Offset Accounts

100% Offset Accounts

An offset account is available with most variable rate home loans.  Offset accounts are bank accounts which have a range of transaction facilities attached, such as a debit card or EFTPOS card.  You can arrange to have your salary paid into your offset account. Over time, savings in your offset account can help to reduce the loan principal, allowing you to pay off your loan sooner or build up equity.

The main attraction of an offset account is that every dollar in the account offsets interest on your home loan. Saving on interest is a major draw card for home owners.  Over a 30 year loan the savings can add up to hundreds of thousands of dollars if you keep adding funds to the balance of your offset account over the years.

Loan Terms
The terms of the loan will be similar to any other loan, with you choosing how long you want - up to 30 years is the norm.

Repayments
You still make your regular repayments on the loan.  But with the offset account, your interest payments will be lower in the long run. Check with your lender to see if you can make repayments weekly, fortnightly or monthly.

Loan Features
There may be account keeping fees for this type of loan but the benefits may far outweigh these costs.  You can choose if you wish to pay for everything on credit, and extend the time in which money is sitting in your offset account. So you can pay bills on credit for example, and leave as much money in your account as possible, earning you interest for another month. This is only if you have no outstanding debt on your credit card.

Interest Rates
You pay a slightly higher home loan interest rate on your home loan to have an offset account, but it is such a great way to save money over the long term that the higher rate may be worth it.  For example, a standard variable rate will be higher than a basic variable rate, perhaps by 1% but if you use the offset account wisely, the savings will make it count.


For more advice and information on offset loans, call and talk to a local mortgage broker today, on .

 

With interest rates coming down, now is the time to speak to a mortgage broker. We know which banks are dropping rates and who is raising.

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