Mortgage offset accounts or home loan offset accounts may save you money, reduce the amount of time it takes you to pay off your loan and help to insulate you against interest rate rises.
So, how do offset accounts work?
A mortgage offset account is effectively a savings account that's attached to your home loan. It has all the usual benefits of a regular savings account, allowing you to make deposits and withdrawals, giving you a credit card attached to the account, plus it pays you interest.
However, unlike a normal savings account, a mortgage offset account pays interest at the same rate as your home loan. This is usually more than a regular savings account and it's where you can make big savings on your mortgage.
A mortgage offset account will even work for you if you don't have a lump sum to deposit. Just by depositing your salary into it each month and using it like a regular account to make payments and withdrawals etc., you can save thousands over the life of your loan.
Another benefit of mortgage offset accounts is that they're completely
What to look for in an offset account
With interest rates so low, lenders are being more competitive by offering some great features to mortgage offset accounts to make their loans more attractive. When we help you look for a loan with an offset account, we consider the accounts that give you as much flexibility as possible, preferably with the following features:
How does it help to cut down on the length of my loan?
Here's an example (calculated on a 5.88% interest rate).
Let's just say you have a home loan of $150,000 over 30 years. Without an offset account, you would pay $167,000 in interest over the life of your loan.
If you had the same home loan with a mortgage offset account containing a balance of $10,000 for the life of the loan, you would only have to pay $127,553 in interest. What's more, the additional money coming off your home loan balance would pay the loan off in 26 years and 4 months!
This represents a saving of $38,636.95 plus three years and eight months on the term. Obviously, the more money you have in your offset account, the more you will save and the quicker you will pay off your loan. What's more, your mortgage offset account will give you the additional flexibility of having money on hand if you need it.
How do I find the right loan with the right offset account?
With interest rates currently at historical lows, many lenders are offering great mortgage offset accounts to make their loan products more attractive. There are literally hundreds of loan products on the market, tailored to a variety of different uses. You can get loans with mortgage offset accounts for regular home loans, property investment loans and even for construction and renovation purposes.
That's where we come in. With access to a wide variety of lenders, we can pick and choose. We do all the legwork to find you the right product for your particular needs and personal financial circumstances. To find out more, simply call us for a chat.
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