We often hear that a mortgage offset account which is otherwise known as an interest offset account can save thousands off your home loan but how does it work?
When you take out your home loan a transaction account is linked to the loan. This account will be like any other account and you can receive an EFTPOS card, Debit Card and it can have other features such as any other transaction or saving accounts.
The real benefit of the offset account is that it is linked to your loan and the credit balance in your offset account is offset against the daily balance of your loan. This will reduce the interest you pay. So for example if you had a $300,000 loan with an offset account with a $15,000 balance then you would pay interest only on $285,000 ($300,000 less $15,000).
Having a reasonable balance in your offset account means you can reduce your loan term in years and also save considerable interest. This also works well if you have your salary deposited in your offset account. When choosing an offset account be aware of the following pitfalls:
The last point is extremely important, as any interest earned in your account will also offset your home loan interest so you can enjoy interest savings. This offset is also completely tax free.
Typically offset accounts are used by property investors but Mortgage Broker What If We Finance believes offset accounts are great for all home-owners as regardless of the balance as you avoid paying unnecessary interest to the bank.
Contact your mortgage broker today to find out more and start saving today.