This week we’re sharing our easy guide to Offset Accounts to demonstrate how you can utilise them to potentially save you thousands and shave years from your mortgage. Our guide will tell you the basics but should you want more information don’t hesitate to contact us via our online form or on 02 8412 0009.
The basics…
If you want to pay off your mortgage sooner, a home loan with an offset facility can be an advantageous option to reduce the interest payable against your outstanding loan balance and to reduce your overall debt levels.
An offset account is a transaction account attached to a home loan. The balance of a 100% offset account is taken away from the principal remaining on the loan for interest calculations.
Building up your offset savings account by making regular deposits of your income, rental earnings or any other savings you accumulate will reduce the loan amount interest is charged on.
Compared with depositing money into a separate savings account where any interest accruing adds to taxable income, using a mortgage offset account generates no tax burdens.
Details to note…
- 100% Offset Accounts are generally only offered to people on variable home loans
- Partial Offset Accounts are available for fixed interest rates (offered by fewer lenders)
- Your repayment amount will stay the same, however the balance interest is charged on will reduce
From the above example, you can see that the savings balance of $30,000 offsets the initial loan amount of $400,000 to reduce the balance interest is charged on to $370,000. 
From the Offset Calculator you can see that over a 30 year term (at 4% interest) you could save around $29,000 in interest and shave 2 years and 8 months from the loan term. As always it’s important to note that the best loan structure for you is specific to your requirements, therefore it’s always best to speak to a mortgage broker. Please feel free to contact us via our online form or on 02 8412 0009 to discuss your options further.
