100% offset home loans may help you to decrease the amount of interest you pay on your home loan. They work by a structure of depositing your salary straight into an offset account. The benefit is that you immediately reduce the amount of interest you are paying.
A 100% Offset home loan is a home loan that comes with a linked bank account which is called an offset account. This offset account operates very much the same as a normal bank account, with one difference, the balance of the account reduces the amount of interest you pay on the linked home loan.
When interest is calculated on the home loan, the balance of the offset account is deducted from the balance of the home loan to determine the amount of interest payable. An All-in-One Home loan operates on the same principle, with the difference being that the offset account and home loan are merged into one single account.
When used properly, an offset account can allow you to pay your home loan off faster than you otherwise could – which means putting as much money as possible in the offset account as often as possible, and leaving it there as long as possible. A valid strategy is to use a credit card with an interest free period for all your expenses, and pay off the credit card in full at the end of the interest free period. In this way you are leaving your money in the offset account for the maximum possible time.
Please note that the benefits of an offset account are that many lenders charge additional fees or higher interest rates for offset loans, which has to be assessed against the interest savings the offset account will generate, which will vary depending on your income and spending habits. As an alternative, many basic variable loans now come with free redraws, so often it is better to get a lower rate basic loan and simply redraw the necessary funds each month to repay your credit card.
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