Tips for Maximising the Benefits of an Offset Account
Having an Offset Account is one of the most desirable home loan features and for a good reason. It gives you the opportunity to pay down your loan sooner and save thousands in interest over the life of your loan. But many people can still get confused about how an offset account works or unsure about how to use it properly to their advantage.
We cover the top mortgage offset account benefits and tips below to show you how much freedom and flexibility this convenient loan feature provides.
Offset account explained
An offset account is a home loan feature that helps borrowers save on interest and pay off the loan faster. Money deposited into this account linked to your loan ‘offsets’ or reduces the loan balance before interest is calculated daily.
For example: If you have a $400,000 mortgage and you have $40,000 in an offset account linked to your loan – you will only pay interest on the balance of $360,000. Meaning the more you have in your offset account and the longer you leave it untouched, the more interest you will save!
Loan offset benefit
Home loans that offer an offset account will help you reduce the amount of interest you pay on your loan over time and also reduce your loan term. Always check that your loan offers a 100% offset, which means that the full balance in your offset account, on any given day, is deducted from your home loan balance before interest is calculated.
How to maximise offset account
There are a few ways to get the most from your loan offset account.
Tip 1: Have your salary paid directly into the offset account to save on interest. It works just like an everyday account, so you have easy access to your money, and If you’re making weekly or fortnightly loan repayments via direct debit, the rest contributes towards reducing the principal and interest.
Tip 2: Leave your salary in the offset account and use your credit card for all expenses. Take maximum advantage of the interest-free days on your credit card, while your salary offsets the home loan and saves you interest. When you receive your statement just pay off the balance in full, it’s that easy.
Tip 3: Keep all your additional savings and any lump sum payments you receive like company bonuses or tax refunds in your offset account, instead of a high-interest savings account. The amount of interest you could save on your loan with an offset account far outweighs what you will earn in interest keeping your money in a separate savings account.
Mortgage House is the winner of the Best Offset Home Loan 2018 at the Mozo Experts Choice Awards for Best Home Loans in 2018. If you want to save on interest and pay off your loan faster, our winning Offset Home Loan could be the right one for you.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of buying a home, you can contact us for information about the best options for you when it comes to your mortgage.