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Using an offset account for your mortgage

Are you wondering how to shave years off your mortgage and dollars off your weekly, fortnightly or monthly repayments.

Whether you are a home-owner or investor, you might be wondering how you can reduce the interest you pay on your mortgage.

An offset account is a great way to pay off your home loan faster. Linked to your loan, this option offsets against the principle of the loan thereby reducing the interest you pay.

There are a few important considerations, however.
 

Flexibility

The great thing about an offset account is the flexibility it provides.

You can access your money as it functions like a transaction account. This means you're not going to get caught out if any emergency costs arise, or if you just want everyday access to your funds.
 

Fees and benefits

With any account, you'll want to consider what the fees are. For example, consider how much you'll save in interest versus any account fees.

A term deposit might offer a promising interest rate, but could you better utilise your funds by reducing interest payable on your home loan and having greater flexibility?

As with any financial decision, make sure that you research the options available and make the right choice for your personal circumstances.
 

Salary

A tip to keep in mind with offset accounts is that you can channel your salary or wages into them.

This is easy to set up - just ask your employer about changing the account details they use to pay you.

This way, you'll have money going into the account without having to think about it!
 

Total offset

A 100 per cent offset account allows the entirety of the account's balance to help mitigate the interest to be paid on your loan.

This means that every cent you link to your home loan - reduces the interest payable - so it pays to have regular amounts, such as your salary, in the account.
 

100% Offset Redraw Facility

At loans.com.au we provide the extra convenience of a combined 100% offset redraw facility, where 100% of the funds are used to offset your loan balance, and you have full redraw access. You can transfer all surplus funds into this account, get 100% of the funds to offset your loan balance, plus full transactional access to redraw your extra repayments when you need them, at no cost.
 

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This information has been prepared without taking into account your individual objectives, financial situation or needs. You should, before acting on this information, consider its appropriateness to your circumstances.

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