If you’re looking for a home loan that enables you to pay off your loan sooner without even thinking about itm then the 100% offset account home loan is for you.
An offset account is a regular cheque account that has ATM, cheque book and internet access that is linked to your home loan when then loan is setup. You will save interest on your home loan, instead of earning interest on the money in your offset account.
Usually the interest rate on a savings account is far lower than the interest the bank is charging you on your home loan, so this is beneficial.
They’ll charge you interest on the balance of your home loan less the balance of your offset account.
Which Lenders Offer 100% Offset Account?
From lender to lender the interest rates and fees that can be offered for a basic home loan will vary, however all the major banks offer similar features for their 100% offset account.
Some common basic loan products are:
- CBA– MAV Standard variable rate / Standard variable rate / 12 month discounted variable rate.
- Westpac- Premier advantage rocket investment loan / Premier advantage rocket repay home loan / Rocket repay home loan.
- St George- Advantage home loan package standard variable rate / Standard variable rate home loan / Advantage home loan package 1 year discount variable rate.
- Suncorp- Money manager standard variable / Standard variable rate loan.
- ANZ– Professional benefits standard variable residential land loan / Breakfree standard variable residential land loan / Breakfree standard variable package / Standard variable rate loan.
- NAB– Tailored home loan choice package / Tailored home loan / National flexi plus.
- AMP- Professional & basic loans with offset accounts are available.
- Citibank- Mortgage plus package home loan.
- ING- Orange Advantage home loan.
- And many more….
How does a 100% Offset Account Work?
The way a 100% offset account works is it is a linked transaction account that would usually have ATM and Cheque access.
You can simply deposit your salary into this offset account, and it can be used for all your daily expenses just like a normal cheque account, and by doing this the amount of interest that you would normally pay will be decreased.
Basically, the more money that you have in your offset account will lower your interest expense. To make the most out of your 100% offset account, you should consider the following:
- Have your salary deposited into your offset account so that the amount of interest you pay will be less.
- Ensure that you have sufficient funds in this account to make your loan repayments.
- You can redraw from your home loan account to offset account if need be.
- Use your offset account for transactions with your debit card including ATM, EFTPOS, internet banking, cheque book and BPAY.
- Repayments are made to the home loan account from the 100% offset account.
Should I Put My Extra Fund in the Loan or Offset Account?
Theoretically there is no actual difference between putting your additional funds in the home loan account or in the 100% offset account.
Thought when it comes down to it, we find it is better that you just keep your day to day funds in the offset account and then put all your extra funds in the home loan account, by doing this you won’t see the funds on a day to day basis which will help you from being tempted to spend them.
Who can Benefit from a 100% Offset Account?
Regardless of the amount of money that they wish to borrow the 100% offset account is available to anyone, there are no account keeping or hidden fees with this type of home loan so it won’t essentially cost you any extra.
Here at Proximity Financial we find that dual income families with high monthly expenses tend to benefit the most from an offset account, this is mainly because they need the most funds available for their day to day spending.
Can Fixed Rates Loans have 100% Offset?
A vast majority of lenders don’t allow 100% offset accounts for fixed rate home loans. Even though that may be the situation, we have a select few lenders that can consider this type of loan.
Offset Accounts on Investment Loans
An offset account will give you additional benefits if you have an investment property with a tax deductible investment loan on it, if you make extra repayment into the loan account and then redraw them at a later date, then that portion of the loan may no longer be tax deductible.
This happens because the tax office looks at the purpose of the funds that you redraw from the loan to determine if that portion of the loan is tax deductible.
If you make an extra repayment into an offset account instead of the loan account then this problem will be avoided.
Regularly we will help customers buy a small unit when they’re young, they make lots of extra repayment into the offset account and then later on they will buy a house to live in and turn their unit into an investment property, since they made their extra repayments into the offset account for their units loan, they have maximised their negative gearing benefits.
* Please note, the advice given by us here at proximity financial, is only general advice. Please contact a qualified accountant about the tax benefits of an offset accounts and the implications of redraws from investment loans.
Can I have an Offset Account with a Basic Loan?
A vast majority of banks don’t offer offset accounts as a feature of their basic home loans. By saying this it mean that if you’re borrowing less than $250,000, then you may need to take out a professional package loan to get an offset account.
Nonetheless, there are some small banks, building societies and non-bank lenders that offer very competitive basic loans with offset accounts. If you have a small loan and need the benefits of an offset account, or you prefer not to pay ongoing fees, this product is ideal for you.
Please enquire online or call us on 1300 856 846 if you would like to talk with our mortgage broker who can give you expert advice on offset account.