It’s all about balance: Using an offset account to your advantage

Want to avoid sinking your entire savings balance into your mortgage? An offset account could be the solution you’ve been looking for.

An offset account is straightforward to set up and easy to understand. It also has the potential to save you thousands of dollars and could shave years off your mortgage.

Got your interest yet?

Yup! But what’s an offset account?

Basically, an offset account is a regular transactional account which is linked to your home loan.

The advantage is that you only pay interest on the difference between the money in the account and the mortgage.

Banks usually offer two types of offset accounts – full offset account, or partial offset account.

A full offset account means that the entire amount in the account is deducted from the principle before you start to pay interest.

In a partial offset account, a reduced interest rate on the mortgage is offered on the equivalent amount in the offset account.

Whichever you choose will depend on the bank and the type of mortgage you have.

How does it work?

Say you owe $350,000 on your mortgage, and have $50,000 in a savings account that you currently use for regular transactions.

If you move that $50,000 into a full offset account, you’ll only pay interest on $300,000 (which is the difference between that amount and the loan principle).

The offset account can then continue to be used for all your daily needs, like receiving your salary and withdrawing cash.

This sounds great! Now where can I find a cheap home loan rate with a 100% offset account?

Homestar Finance, who have received 5 Star Ratings from Canstar, are offering an owner occupied variable interest rate of only 3.54% with a comparison rate of 3.59%. This loan product comes with a 100% offset account and $900 cashback upon settlement! Find out how you can save here: https://bit.ly/2zxO97x