This week, The Reserve Bank has lifted interest rates for the fifth month in a row, increasing the cash rate by 0.5 basis points (BPS). Now at 2.35 per cent, the rate is at a seven-year high.
It is completely understandable that home loan customers are anxious and uncertain given these circumstances.
\”Every dollar saved is a dollar earned\”
Many home loan customers are in unchartered territory, with rates now at levels not seen since before the Global Financial Crisis. I am here to reassure you that you are in good hands with Integr8 Finance Solutions. Take a deep breath and remember that there are options available to help keep your repayments lower.
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What is an Offset Account?
An offset account is a savings account that is linked to your mortgage. Any money you have in this account is offset against your mortgage balance, which reduces the amount of interest you pay. For example, if you had a $300,000 mortgage and $20,000 in your offset account, you would only be charged interest on $280,000.
This can make a big difference to your repayments.
You can make deposits or withdraw from your offset account as you would with a regular transaction account.
What is the difference between an Offset Account and a normal Transaction Account?
The main distinction between a regular transaction account and an offset account is that you could reduce the interest charged on your home loan if you keep money in an offset account for a length of time. The higher the balance within your offset account, and the longer the period, the less interest you’ll pay. This could assist you in paying off your mortgage sooner.
An additional advantage of an offset account is that the interest you save by using this type of account is not considered income – this means it won’t be taxed.
How does a home loan with a 100% offset savings account work?
You will have two separate accounts (a home loan and an offset savings account).
- Your mortgage balance is lowered by the amount you have saved up in your offset account.
- Daily, the interest is calculated on the net balance. That means your home loan balance less your offset savings account balance.
- Rest assured, you will have full access to your funds whenever you need them.
- On your surplus funds, you will earn tax-free interest.
- Generally, you will have unlimited free transactions through EFTPOS and ATMs, and benefit from no account keeping fees.
- Depending on which lender you use, you could receive a separate statement for your day to day savings account.
- The minimum payment required is P&I or Interest Only for a pre-determined period.
- You have the option to “park” your additional repayments in the 100% offset account and redraw the funds when you need to make a purchase (for example, if you were to buy a car).
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Is an Offset Account a good option for you?
Although each home owner is different and unique circumstances apply, an offset account is definitely worth considering if you have a variable rate mortgage and are looking for ways to reduce your interest payments.
If you would like more information on how an offset account could work for you, please don’t hesitate to get in touch with Integr8 Finance Solutions.
If you\’re feeling lost or uncertain about how to navigate these choppy waters, please reach out. I am more than happy to have a no-obligation chat and answer any questions you may have.
In the meantime, remain calm and remember that there are still options available to help keep your repayments low. You’ve got this!
About Teri Maloon
Teri is a mortgage broker based in Melbourne, Australia with more than eight years of foreign and Australian financial planning and broking experience. Teri has the qualifications and credentials to guide you through the appropriate strategy to secure a loan suitable to your requirements. Her priority is to help smoothly navigate the legalities and the loan process proficiently to achieve the most favourable outcomes for her clients.
Teri has a reputation for acting with honesty in the mortgage brokering business. This implies being upfront and honest with clients, coworkers, and other industry professionals. She places emphasis on being well-versed in the products and services she provides, as well as having the ability to explain them clearly to customers.
Contact Teri Today
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This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.