What is an offset account?
Tuesday 11 October 22
There’s been a lot of discussion lately around offset accounts and how they can shorten the length of your home loan and save you money.
How does this work?
An offset account is a transaction account that is attached to your home loan.
You can use it the same way you would use your everyday banking account, as you’ll receive a debit card and your salary can be deposited directly into it.
So what’s so special about it?
Offset accounts can dramatically change the amount of interest you are paying on your home loan. Everyday, the amount you have in your offset account will be compared to the balance of your mortgage and this will determine how much of your loan you’ll pay interest on.
For example, if you have a $300,000 home loan and $10,000 in your offset account, you’ll only be charged interest on $290,000.
Tell me more…
Because home loan rates tend to be higher than what is offered for a savings account, offset accounts can be a great alternative for those wanting their money to work harder for them.
It’s always advisable to speak to a mortgage broker on whether this is an appropriate option for you and I am happy to have a chat with you about your options.
Here's a fun video Beth made an an attempt to better explain the concept...