We’re often asked by home buyers if they should link an Offset Account to their new home loan, especially given it could potentially save you thousands of dollars if used correctly.
It’s a great question, and the answer is like most things there are pros and cons …
An Offset Account is a transaction account that gives you the ability to use your savings to reduce the amount of interest you’re charged over the term of the loan. Put simply, every dollar you have in the account ‘offsets’ the balance of your loan – reducing the amount of interest you pay each month. Because these savings add up over time, you can also use this ‘extra’ money to pay your loan off faster.
Offset Accounts are not for everyone
While Offset Accounts can be a good way to get ahead on your mortgage, there are, however, some possible disadvantages you need to be aware of …
Number one of these is Offset Accounts are typically more expensive than most kinds of loans. Interest rates are usually higher, as are the bank fees and charges that come with the account. Which means you will need to maintain a sizeable balance in your account to negate these fees and charges to reap the benefits.
Offset Accounts are also only offered on variable rate loans, so they restrict your ability to lock in fixed term rates. This said, you can address this by splitting your loan to have a portion at a fixed rate and the remainder variable.
Our expert Home Loan Advisers are here to walk you through all your home loan options.
Talk to them today. Call 1300 My Expert (1300 693 973) or complete our online enquiry form here.
Disclaimer: The information provided in this blog is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this blog you should consider the appropriateness of the information having regard to your objectives, financial situation and needs, and it is important for you to consider these matters and to seek appropriate legal, tax and financial advice. Pinnacle Advisory Pty Ltd trading as My Expert® Wealth ABN 36 638 505 950 is a corporate Authorised Rep of MG Wealth Advisors Pty Ltd AFSL n. 496089 ABN 20 617 338 137.