Offset accounts: Questions and Answers
When you talk to a mortgage broker in Bowen, Airlie Beach, Collinsville, Proserpine or wherever you may be located, they’ll sit down with you to figure out the appropriate strategy for your mortgage. Part of this involves deciding which home loan features would be useful for your particular situation.
One of the most common and popular types of features out there are what are known as offset accounts.
What are offset accounts?
Also known as 100 per cent offset accounts, they are everyday transaction accounts that are linked to your mortgage. The account is essentially no different to any run-of-the-mill savings account. You can spend the money as you would with any other account, get a bank card for it with which you can withdraw money from ATMs, and in some cases you can even take out a cheque book for the account.
Why are offset accounts beneficial?
What makes offset accounts so useful is the savings they can help you make on your mortgage. The reason they’re called “offset” accounts is because its balance is off-set from the total left on your mortgage. This means that you can end up saving a substantial amount of money on interest every month.
For instance, let’s say you have a mortgage worth $460,000. Meanwhile, the total amount of money sitting in your offset account is $15,000. Provided that you do not spend any more money from this account, the next time interest is calculated on your home loan, it will be done so on the lower value of $445,000. While this may seem only a small difference now, it could shave years off your loan in the long run.
Just be aware that not all of them are 100 per cent offset. Sometimes a smaller percentage of your account balance will be shaved off the mortgage.
Can I have my salary or wages deposited into an offset account?
Yes, you can arrange to have your pay cheque placed directly into an offset account. After all, you generally want to keep your balance as high as possible – the objective is ultimately to cut down on your home loan interest. And while you could put money into a savings account to accrue interest, you’ll typically save more money offsetting your high home loan interest than saving at a low interest rate. After all, banks typically make money by charging more interest on loans than they pay on deposits.
Talk to your Mortgage Broker at Eclipse Financial Services today!