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Offset account loans
– This is a separate account linked to your
loan that operates like a normal cheque
account where salaries go in and funds come
out via cheque book, ATM or EFTPOS. The
interest earned on this account is applied
to reduce the interest on the mortgage.
All-in-one account loans
– Similar to an offset account but your loan
account is your account for everyday banking
purposes.
Loans
with free and unlimited redraw
– Instead of having an
offset account you can add extra repayments
into your loan account. This effectively
offsets the interest and helps you pay your
mortgage quicker. The free redraw facility
reduces the costs of withdrawing extra funds
that been paid into the loan account
Loans that have
the ability to offset a mortgage
can help reduce your tax bill by offsetting
taxable income from deposit accounts against
interest paid in after tax dollars on
mortgage repayments.
What to watch out
for:
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Partial offset accounts
where only a percentage of the money in the
offset account
reduces the interest cost
of the loan. In some cases it may be better
to invest your
savings elsewhere or place them into
your loan and redraw them later if required
▪
Added fees and charges
associated with an offset account
Advantages
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Can be used like an
everyday bank account with access to an ATM
card or cheque book
▪
By depositing your
salary and savings into this loan you reduce
the interest charged on
your mortgage
▪
Reduces the interest you
pay on your home loan
▪
Very convenient
▪
A mortgage reduction
program can be helpful in managing this type
of loan
Disadvantages
▪
Extra costs for having
an offset account
▪
Most fixed rate loans do
not come with an offset account
▪
Partial offset accounts
are not as advantageous
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