How a mortgage offset saves you money
Home Loan Offset Accounts
An offset account is a handy facility linked to your home loan that reduces the total amount owing on your mortgage. The offset effect is the benefit obtained by properly using an offset account.
This type of account works by reducing the amount of interest payable on your loan, so you can pay off the principal faster.
100 per cent offset
A 100 per cent offset account is a popular choice as the entire balance of your account will go toward offsetting your loan account. So every single dollar in your account is helping to reduce your home mortgage!
You can access a 100 per cent redraw offset account if you take out a variable rate home loan.
Maximising your offset effect
If you've taken out a home mortgage as an owner-occupier (rather than an investor), it's a smart idea to have your salary paid straight into the offset account to maximise your offset effect.
Have a chat with your employer and they'll be able to change any account details for your weekly, fortnightly or monthly earnings. We can provide a payroll authority form to make sure this happens as smoothly as possible.
You'll make savings on the interest payable on your home loan straight away, rather than having to manually transfer any funds.
Whether you need to pay a bill or buy groceries, you can easily access your funds with a debit card. We understand that day-to-day transactions may pile up, so there are no fees or minimum withdrawals required.
Despite this, you'll still get all the benefits to reduce the interest payable on your home loan - there's no need to shift your money into a special savings account, for example. You also won't need to move any money across to your loan account, either. These aspects of our redraw offset account make it an incredibly convenient option.
To make things even easier, if you take out a variable loan an offset facility is automatically available.
Things to consider
There are a few conditions you should be aware of. If you've taken out a construction loan to build your own home, you can't access an offset account during the construction period.
Repayments must come from one account - you can't split your mortgage repayments across several accounts. It's simple to set up automatic payments from multiple accounts into your offset account. However, you wouldn't be maximising the offset effect by taking this approach, so consider having all your salary going into the account to reduce the payable interest on your loan as much as possible.
It's handy to know that if there is more than one borrower, multiple salaries can go into one account. For example, a couple buying their own home might have both salaries go into an offset account to maximise their offset effect.
Utilising a redraw facility
Along with an offset account, there's a handy redraw facility available that allows you to place extra funds in the redraw of the loan account (rather than the offset account).
A redraw facility is also useful because it removes the temptation of spending extra cash that's in your daily account. You're saving any extra money you have, but you still have access to it.
For example, if you didn't want all of your savings in your everyday account to avoid any impulsive splurges, you might transfer $5,000 or $10,000 from your offset account to your loan account. You'll still get the offset benefit, but your savings are separate from your everyday spending, so you can see where your financial future is heading.