Australian Mortgage and Loan Information

Home Loan Mortgage Offset Account

A few extra dollars a month paid off your mortgage can result in substantial reduction in your overall payments and home loan term. However, if you have a good regular income and can save. Why not consider a home loan with a FULL offset facility. This quick and simple option helps you keep your financial eggs in slightly separated baskets giving you a lot more control over your financials.

How does it work?
A home loan mortgage offset savings account is simply a bank account linked to your loan account. The balance of this account is offset against the amount you owe on your mortgage. With a full offset account, you effectively only pay mortgage interest on the difference. On partial offset accounts, the offset may be only 50%. Check with your lender. Generally the features of this offset account are similar to a statement savings account, meaning you can come and go as you please, however some lenders require you to meet a minimum balance requirement.

Over time, savings in your offset account can help to reduce the loan principal, allowing you to pay off your loan sooner or build substantial equity.

Example: Obama and Michelle have a $500,000 mortgage and $100,000 in their linked 100 per cent offset account. The principal of their $500,000 loan is reduced by the $100,000 in the offset account to $400,000. As a result, interest only accumulates on the $400,000 balance of the loan. Obama and Michelle continue to make their normal repayments on their entire $500,000 principal and interest loan. Over a number of years, both the principal and interest on their loan are repaid faster. At the same time they have a savings account they can use for emergencies or for retirement planning.

If you don’t have this facility, find a lender who will work with you who does offer this feature.

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