If you can attach an offset account into the home loan, you will be able to get rid of a portion of your interest payments. This option has become popular among individuals who are looking forward to pay off mortgage sooner. However, it would be a good idea for all the people who obtain a home loan to have a clear understanding about the offset account.
What exactly is an offset account?
A mortgage offset account can simply be defined as a transaction account or a savings account, which can be linked to the home loan. The account balance would be an offset against the loan balance. As a result, the lender would assume that you have paid off your extra savings to the home loan. Due to this reason, you would be charged with a lesser interest by the lender. It is possible for you to link an offset account into a fixed rate loan as well as a variable rate loan. Some of the home loans available for the people in Australia specify that the offset is applicable only for a fixed term. Therefore, you should pay special attention towards this fact when you are obtaining the loan.
What are the different types of offset accounts?
The offset accounts can be divided into two main categories. They include:
- Partial offset accounts – The interest coming out of your offset account would be applied against the loan balance in order to reduce the total payable interest.
- 100% offset accounts – In here, the complete account balance of your offset account would be applied against the loan balance in order to reduce the payable interest. This is the kind of offset that Well Home Loans has for it’s Well Balanced home loan
Why should you think about getting an offset account?
People who obtain offset accounts are provided with the ability to experience a variety of benefits as well as advantages in the long run. Here is a list of some of the most prominent benefits that are linked with offset accounts.
If you can maintain a decent amount of money in the offset account, you will be able to save a considerable amount of money in the long run. In fact, you will be able to cut down the interest that you will have to pay for years. Every single cent that you have got in your offset account would reduce the overall interest rate of your loan.
When the interest rate increases or your financial situation changes, you will have to pay an extra amount of money every single month. But when you are having an offset account, you will not have to experience a significant jump in the monthly mortgage payments.
The offset accounts can easily be managed. You just need to request your employer to deposit the salary into a transaction account or a savings account on the payday. Then you can link that account into your loan via an offset account. This will help you to save money in the offset account without going through any frustration.
Our Well Balanced product offers both redraw and offset as options that are available.