Mortgage Offset Account

Do I need an offset account?

An offset account can help you make meaningful savings. If you have a home loan which is charging you 6 or 7% interest, then there is little point in directing a portion of your wages to a savings account which is only going to be paying you around 5 or 6% interest. Instead, consider a home loan with a linked offset account as this account is set up at the same time as your home loan and from the same provider and can help you save on interest charges.

The savings in your offset account reduce the interest you pay on your loan. If you have a loan of $250 000 for example, and you have $20 000 in your linked offset account, then in that month you will only pay interest on $230 000 of your loan because your savings offset the rest of the amount. To get the full benefit of an offset account in this way, you will need to make sure you have a 100% offset account, but luckily most lenders are moving towards this feature anyway.

By choosing a home loan with a linked offset account you can save money on your mortgage, and years off your home loan, simply by making a few small changes to your financial habits. However, most lenders charge an annual fee for an offset account, so if you do not have excess cash sitting in your account all of the time it may not be of benefit to you.