What is a Toggle Offset loan?
At Mortgage House, we pride ourselves on having a range of different mortgages to suit the needs of almost everybody. We understand that no two people are the same, and when it comes to their property loan needs, it makes sense that no two people are after exactly the same thing. A toggle offset loan is one of the many examples we have of mortgages that are a little different. A toggle offset loan provides you with the benefits of a variable rate home loan, as well as a fixed rate loan. A variable rate loan means the interest rates can rise and fall over the time of the loan. A fixed rate means you can fix the interest rate for a period of time. It allows you to maximise interest savings through our intelligent toggle offset system, where half your loan is fixed and half is variable. One offset account is linked to the variable, and another to the fixed. You can toggle between the two to make interest savings.
What does offset mean?
An offset account is a normal transaction account that is linked to your mortgage. The balance in that account offsets the principal amount of the loan, which can help reduce the interest payable. For example, if you have a loan of $400,000, and your offset account has $50,000 in it, the interest will be payable on $350,000. So, the overall interest is calculated on the loan amount minus what’s in the offset account. Obviously both can change at any given time, meaning the interest amounts can also change. With toggle offset mortgages, there is an offset account for the variable rate portion of your loan, and a separate offset account for the fixed rate section of your loan. You can toggle between the two based on where you think you can save the most interest. Your repayments will stay the same, but how much of your payments goes towards your principal and how much goes towards interest changes. It can save you thousands of dollars and make a significant impact on how long it takes you to pay off your loan. One option can be to pretend to pay a 30-year loan off as you would pay, say, a 15 or 25 year loan. Instead of making the extra payments, put them into your offset account. This gives you access to the money if you need it for other things, can allow you to pay off your loan faster, or can give you a buffer if interest rates rise.
What are the benefits of Toggle Offset mortgages?
The first benefit with toggle offset mortgages is that you won’t have to decide between a variable or fixed rate loan. That can be a big relief for some people. Secondly, as we discussed above, one option is to make higher payments into your offset accounts and still have access to that money in case of emergencies or a rise in the variable rate. You can also make additional payments to toggle offset mortgages without attracting penalties or fees, which can happen with some fixed rate loans. Finally, you have access to half a loan that can benefit if variable interest rates drop, and you have the security of a fixed rate if they rise quickly.
How is a split loan different?
A type of loan that is not dissimilar to toggle offset mortgages is a split home loan. Like toggle offset, a split home loan allows you to split your home loan between a fixed rate and a variable rate. Unlike toggle offset mortgages, you can choose the percentage of the loan you want fixed and the percentage you want variable. You can even change that percentage a certain amount of times for free, depending on your circumstances and the rate. However, there may be no direct offset accounts linked to split home loans as they are generally simpler loan structures, which doesn’t allow for toggling. However, speak with us and we can see whether this is available on our loan options.
What types of Toggle Offset loans are there?
At Mortgage House, we have access to a number of different toggle offset mortgages that can help make your property dreams come true. We have a large range of mortgages with fixed rates, with periods of between one and five years. We also have toggle offset mortgages for investment loans, as well as interest-only mortgages. And, of course you can chose from our popular standard loan options as well. Our award-winning way of doing things means we can be with you every step of the way, from the first day you think about buying a home, to the day of settlement – and beyond. We understand your needs change all the time, and our comprehensive range of mortgages means we can help you achieve your goals, whatever they may be.
How do mortgage offset accounts work?
Offset mortgages such as toggle offset mortgages offer customers extra flexibility and the opportunity to save money by reducing how much the interest rate component of your repayments can be. As mentioned above, by using non-interest-bearing saving accounts to offset the loan amount, offset mortgages mean you only pay interest on the difference.
With your loan being split between variable and fixed rates, you will have two offset accounts linked to the mortgage, one for the variable half and one for the fixed. You can toggle between the two to take advantage of the amount of interest you pay. As the offset account can also act as a savings account. Offset mortgages can give you the extra flexibility as you are able to access these accounts as you wish, for whatever reason. All that will happen will be that the amount of interest you end up paying on your home loan may change accordingly.
Make sure you check out the Comparison Rates of the offset mortgages you are looking to choose from. That will give you an indication of how much a mortgage can cost you over the life of the loan, once all the fees and charges have been taken into consideration.
Are offset mortgages a good idea?
Like all home loans, offset mortgages have pros and cons. So it is important to speak with our expert lenders to see whether they are suitable for you as it can come down to a range of factors including your own financial situation. These mortgages offer a flexible alterative to a regular home loan, especially if you are an owner occupier. Being able to use bank accounts that are linked to your offset mortgage to only pay the interest on the difference is certainly an attractive option to a lot of people.
To get the most out of offset mortgages it can sometimes be important to keep an eye on the variables that can impact interest rates, such as the state of the national and world economy, the official Australian cash rate as set by the Reserve Bank and what other lenders are doing with their interest rates. Whether or not offset mortgages are suitable for you and your family is worth discussing with your financial advisor, while speaking with our expert lenders about the options available.
Who offers offset mortgages?
With so many lenders in the market today, and so many home loan options, it can be difficult to choose who the best lender is for you. At Mortgage House we pride ourselves on being different, by working hard to find offset mortgages and other home loan options that are suitable for you and your family. We are focussed on actively listening to our customers’ needs, and not telling them what we think they need. We also always identify suitable options for each customer and engage specialist technology to ensure a simple and seamless process. All this, and Mortgage House’s commitment to be beside you every step of your home loan journey, makes finding a suitable offset mortgages a lot easier.
How long to pay off mortgage with offset account?
Offset mortgages are exactly the same as regular home loans when it comes to how long it can take to pay them off. However, if you manage them cleverly over time, you may be able to pay them off sooner by using the toggle offset feature cleverly. Look at the terms and conditions of the loan to understand whether there are certain rules linked to your home loan and the offset accounts. This can make things clearer. Making extra repayments is a good way to help you pay your offset mortgage off sooner. Some loans allow you to make unlimited extra repayments without being penalised, whereas some mortgages only allow you repay a certain percentage earlier. Speak with our expert lenders to find out how you can take advantage of these features.