To help maximise the balance of your offset account, one option is to get your salary deposited directly into your offset account and then use the account as an everyday transaction account. Because your home loan is offset on a daily basis, the longer you keep your money in an offset account, the more interest you could save.
If you have a credit card and are disciplined with your spending and repayments i. The theory is this could help you keep money in your offset account for longer and save more interest on your home loan.
However, this approach can be quite risky and may not be suited to everyone. For example, you would need to make sure you repay your credit card in full and on time each month. Also, you would need to avoid unnecessary spending that could make the repayments less manageable. Such spending could also lead to you building up debt that would incur interest or monthly fees that would likely far outweigh any savings made through your offset account.
It could also help to factor in any other credit card fees too, such as the annual fee, before deciding if this approach is suitable. In reality, particularly early in your loan term, your home loan balance is likely to be significantly larger than your offset balance, so having a competitively priced home loan could make a significant difference too. Saving up a larger deposit for your home may also save you considerable money during the lifetime of your loan too.
Offset accounts and redraw facilities are both common home loan features. However, there are some differences and it is important to consider which would work best for you:. The main difference between an offset account and a savings account is what happens with interest. With a savings account, you generally earn interest on the balance of the account, whereas with an offset account your balance works to help you save on interest that you otherwise would be paying on your home loan.
An offset account also generally offers more transaction options than a savings account would, as you can generally use it for everyday payments using a debit card, tap and pay and other payment methods. Being mortgage-savvy could potentially save you tens of thousands of dollars over the life of your home loan, depending on the loan size and savings techniques used.
Here are some ideas that could be worth weighing up that may help improve your home loan saving strategy:. You can also check out our range of Home Loan calculators to help you get a better understanding of your financial situation. Additional reporting by Tamika Seeto. This content was reviewed by Deputy Editor Sean Callery as part of our fact-checking process. An Aussie mortgage broker can help you with this home loan product as well as many other home loans from leading lenders.
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For example, instead of earning say, 2. Assuming your home loan rate was 4. Generally offset accounts are most often attached to variable home loans. All lending subject to lending guidelines. Terms and conditions, fees and charges apply — details available on application. This information is general advice only and does not take into account your objectives, financial situation or needs your "personal circumstances".
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