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Offset Accounts

“So what is an offset account, basically this is a bank account that the lender will give you with your home loan and any money that’s in this bank account will offset against the interest of your mortgage. So let’s say you have a $400,000 loan and what you’ve got is $10,000 in savings, that are sitting in your bank account. Now that $10,000 will offset the interest on your home loan, so essentially what you’ll be paying is the interest of a three hundred and ninety thousand dollar loan.”

“This saves you interest and because you’re saving interest and not making interest like if you had it in a savings account its non-taxable… let’s say you’ve got your $10,000 in the home in the bank account and that’s offsetting against your home loan and then you have some bills come in, the car needs rego, needs some fixing and you need new tyres etc. and all of a sudden you’ve got five thousand dollars.”

“That’s fine… it’s your money you can access it anytime you want, you can spend it most banks will give you an ATM card to operate the account. And then what happens is let’s say you’re left with $5,000 that you’re then paying the interest on a home loan of 395 thousand and that’s how it works.”

“Some banks will even offer multiple accounts so this basically is you generally have one account which you can operate through an ATM card, then you will have a series of other bank accounts which you can access via their banks online portal, and I’ve got customers that will save school fees in one, the holiday, any house renovations, new car fund that some banks will let you have up to 6 offset accounts, all the money they are saving in these accounts at any one time will be offset against the home loan.”

Written by

Stephen Bonfield, the Managing Director, previously worked for one of Australia’s major home loan companies as an independent mortgage broker. Steve used this experience to set up his own mortgage broking company - a company that places customer needs at the forefront.

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