Attaching an offset account to your home loan can be an extremely useful tool for reducing your home loan debt, if used correctly.
Quite simply it is a savings account attached to your home loan account. As the name suggests, an offset account is used to offset the costs of your home loan, specifically the interest charges. If you are considering one, you should look for a 100 per cent offset account to gain access to the biggest savings possible.
How do offset accounts work?
An offset account works by taking the full balance in your account and using this total to reduce the amount owing on your home loan. The more money you have in your offset account, the lower your loan balance and interest rate charges will be.
How do I use an offset account to the best advantage?
To get the most out of an offset account you need to put every spare cent you have into it and keep as much money in there for as long as possible.
Make sure your salary is credited directly to this account and schedule your regular payments via a direct debit arrangement, making sure the schedule leaves your money in your account for as long as possible – you can usually choose what day you’d like make payments for any payments you make regularly, such as pay-by-the-month insurance.
As long as you are disciplined about paying the full balance, another way to ensure as much money as possible stays in your offset account is to make all of your required purchases on a credit card with an interest free period, paying the balance off from your savings at the end of the interest free period.
Talk to a Priority Lending mortgage broker about your offset account home loan options today.
Source: Priority Lending