The benefits or features listed below are sometimes not offered by all lenders and we are listing features and benefits here only for the purposes of having you understand the basics of this product.
The pros:
You can offset your savings against your mortgage. Your everyday savings are working harder at saving you interest whilst ever there are funds in the offset account.
You can deposit savings from other savings accounts into your offset account and save the same rate as the interest you pay on the loan. It is a very effecting way to save money.
Some lenders will allow a partial offset against some fixed rate loans.
You have access to the money in your offset account at any time, like any savings account.
You will have full access to the usual banking facilities with your offset account with most lenders. Features such as Internet banking, phone banking, ATM card access, etc
What do you need to be careful of regarding offset accounts?
The main thing to know is that if you have an offset account and if it is not set up with the best possible lender, then you could compromise savings.
Savings are made over time, and anything that is negatively affecting your offset account will cost you money over time, which will add up.
The cons:
Selecting an offset account may not necessarily be the best option for you. Discipline is the key here.
Setting up an offset account and loan combination with the wrong lender. Quite often we find clients have set these loans up with a lender who has not looked at all of the ways to maximise potential savings.
Not using the offset account properly. Not using all the features attached to an offset account correctly, will cost you money.
Only putting some of your savings into the offset account, rather than all of your savings, will also cost you money. Example: if your home loan rate is 6%, then you would be saving 6% on any money applied to the offset account, tax free. It is better than earning 1 or 2% in a savings account, and then paying tax on interest earned.
Your Mortgage Broker will be able to assist you with any further questions that you may have and we will be able to assist you in understanding the best options for you and why.
You will speak with a broker who will take into account your needs by discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
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