What is an Offset Account?
An offset account is a transaction account that is linked to a mortgage account. It reduces the amount of interest you pay on your loan. The balance of the offset account is subtracted from your loan balance, so you only pay interest on the difference.
Here are some additional benefits of an offset account:
- Reduced interest payments: The more money you have in your offset account, the less interest you will pay on your home loan. I.e, if you have a $500,000 home loan and $20,000 in your offset account, you will only pay interest on $480,000.
- Flexibility: You can access the money in your offset account at any time, just like a regular savings account. This makes it a good option for people who need access to their savings for emergencies or unexpected expenses.
- Tax benefits: The interest you save by using an offset account won’t be considered income – which means it won’t be taxed.
- Ease of use: Offset accounts are typically easy to set up and use. You can make deposits and withdrawals from your offset account just like a regular savings account.
If you are considering getting an offset account, there are a few things you should keep in mind:
- Interest rates: The interest rate on your offset account will be similar to the interest rate on your home loan.
- Fees: Some offset accounts have (monthly) fees, so be sure to compare the fees before you choose an account.
- Minimum balance requirements: Some offset accounts have minimum balance requirements. If you do not meet the minimum balance requirement, you may be charged a fee.
Overall, an offset account can be a great way to save money on your loan interest payments.
If you are still unsure if an offset account is right for you, speak with at Trusted Financial Choice team today.