What is an Offset Account?
An offset account is a simple way to reduce the amount of interest you pay on your home loan. Here’s how it works:
An offset account is a regular bank account that’s linked to your home loan. The money in this account is used to “offset” or reduce the balance of your loan when the bank calculates your interest. For example, if you have a $500,000 home loan and $20,000 in your offset account, the bank will only charge interest on $480,000 ($500,000 – $20,000).
Here are a few things to consider when deciding if an offset account is right for you:
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Do you have savings?
An offset account is most useful if you have savings you don’t need to touch immediately. The more you have in the account, the less interest you’ll pay. -
Do you prefer flexibility?
An offset account gives you easy access to your money while still helping you reduce interest. Unlike making extra loan payments, you can withdraw from your offset account any time you need. -
Are you happy to pay for the feature?
Some home loans with offset accounts come with higher fees or interest rates. It’s worth checking if the interest saved is more than the extra costs of the loan.
By considering your savings, need for flexibility, and any additional costs, you can work out whether an offset account is a good fit for your home loan.”
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