Offset accounts: are you using them to your advantage?

An offset account is a powerful financial tool that can help homeowners save money on their mortgage and reduce the amount of interest they pay over the life of the loan.

Simply put, an offset account is a savings account that is linked to a mortgage, and any money in the offset account is used to offset the amount owed on the mortgage.

There are several benefits to using an offset account.

First, it can help homeowners save money on interest payments. Any money in the offset account is subtracted from the amount owed on the mortgage, which reduces the interest that is charged on the remaining balance.

Second, an offset account can help homeowners pay off their mortgage faster. By reducing the amount of interest charged on the loan, more of the regular payments will go towards paying off the principal balance of the loan, helping to pay off the mortgage faster.

As you can then see, its important not to change your scheduled repayment but use the interest savings to further reduce the principal amount.

Finally, an offset account provides a flexible way to manage finances.

Money in the offset account is still accessible and can be withdrawn at any time, providing homeowners with a way to manage their cash flow and meet unexpected expenses.

To use an offset account effectively to maximise its benefits, it is important to regularly deposit money into the account to maximise the amount of interest savings.

A tip could be to hold out on the temptation to withdraw money from the account for as long as possible, so the interest savings are higher.

In conclusion, the next time you’re looking for a new home or investment loan or looking to review your loans, make sure to you ask your broker about the suitability of an offset account for your specific financial situation.

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