If you have an offset account (or you’re thinking of getting one), it’s important to make the most of it. There are two major reasons for that.
1) An offset account can help you to pay off your home loan faster.
2) You are usually charged a fee for having the account, so you may as well use it.
Here’s our top tips for making the most of your account.
Tip 1 – Make sure you have a 100% offset account
A 100% offset account means that 100% of your account balance is deducted from your home loan balance.
For example, suppose you have $20,000 in your account and you owe $400,000 on your home loan. You’ll only be charged interest on $380,000 instead of $400,000.
A partial offset account means that only some of your account balance is deducted.
For example, if you have $20,000 in a partial offset account you may only be able to deduct $10,000 from your home loan balance.
Having a 100% offset account therefore means that you are charged less home loan interest.
Tip 2 – Make sure you have easy access to your account funds
Some accounts don’t let you have easy access to your money. They have minimum balance limits that you must maintain. Some also have withdrawal penalties. Avoid offset accounts that have restrictions like those.
Tip 3 – Arrange for your salary to be put into your account
You need to have as much money in your account for as long as possible. A smart way to ensure that is to get your salary deposited directly into it. Every day that you have a higher balance in your offset account helps you to pay less interest.
You should also aim to park any other lump sum funds in there (like a tax refund) until you work out what to do with them.
Tip 4 – Make the most of an interest-free credit card
Another great way to keep more money in your offset account for longer is to use an interest-free credit card for all your everyday purchases.
Some credit cards will offer you up to 55 days interest-free.
But make sure you pay off the full amount before the interest-free period expires. Credit card interest rates are much higher than home loan interest rates.
The bottom line
To get the maximum benefit from an offset account, you need to keep your balance as high as possible for as long as you can.
How we can help
If you’re looking to buy a home, our experienced and licensed brokers at Wisebuy Investment Group can help you to find the right loan. We can also help you with your loan application.
We service a diverse range of clients in the popular Newcastle, Lake Macquarie and Maitland areas. Our brokers also work with more than 60 lenders in the Australian market.
Contact us today for an obligation-free chat. We’d be happy to answer any questions you have.