What Happens to My Offset Account and Available Funds When I Request a Discharge of My Mortgage Loan?
Offset accounts are popular features of home loans because they can save you from paying additional thousands of dollars in interest over the course of your loan term. How does an offset mortgage account work, and what happens to the funds available in your account after you request a mortgage discharge?
How Does an Offset Account Work?
An offset account is a transactional account linked to your home loan. The money used in your account is used to offset the outstanding amount on your home loan. Your lender can only charge you interest on the difference between the two accounts. So, the more money you have in your offset account, the less interest you pay. For example, if you have a mortgage with $200,000 left to pay with an offset account with $50,000 in it, you will only pay interest on the $150,000 difference.
What Happens to it When I Discharge My Mortgage?
When you discharge your mortgage, you pay off the remaining amount on your home loan. Since you now own your home, you lose access to your home loan account, including any features such as an offset account. Depending on the type of offset account you have, your account will either be switched to a traditional transactional account or the money will be used as part of the amount you pay during the discharge process. If your account is switched to a traditional offset account, this change takes ten to 15 business days to process. During this time, you will not have access to the funds in your account. Therefore, you should redraw some of your funds a week or two earlier than you request a mortgage discharge to ensure you have enough money to cover you while the change occurs.
At Mortgage House, we are committed to making the lending process as simple as possible. If you have questions about an offset account or the mortgage discharge process, contact our lending specialists today.