What is an Offset Account?

Never heard of an Offset Account before…not sure if it’s worth having one?

Don’t worry, we completely understand. There is a lot of overwhelming jargon and finance terminology thrown around when applying for a loan with the bank. Our job as your preferred Mortgage and Finance Broker is to better explain the specific features available to you when it is time to apply for a loan.

So, what is an Offset Account anyway?

• An offset account is an everyday transaction account that is linked to your home loan.
• The money you have sitting in your offset account, “offsets” your loan.
  • For example, say you have a home loan of $500k and $200k in your offset account; in this situation, you’ll only be charged interest on a loan balance of $300k ($500k – $200k).

Therefore, you save yourself money in interest paid on your loan by having savings in your offset account.

What are the benefits?

• Reduce the interest you pay on your mortgage by “Offsetting” your savings against your loan balance.
• Can use your Offset Account like an everyday transactional account.
• Pay down your home loan sooner.

Before making the decision to open an Offset Account, it is best to weigh up what features of a loan are most important to you. Nevertheless, whether you are a spender or a saver, an offset account is a great incentive to save money, reduce the interest paid on your loan and essentially assist with paying down your loan sooner.

If this is a feature you are interested in while seeking finance, please reach out to our friendly Mortgage and Finance Brokers here at Financia to discuss further!