Are Offset Accounts worth it ?

Having offset account can be a great way to reduce interest on your home loan and it works by reducing the balance on your loan by the amount in your account.

Example: $10,000 is held in your offset account and you have a home loan balance of $400,000, you will be paying interest on a $390,000 loan.

So base on the above example if the rate on your home loan was 4% and you held this balance in your offset account for a full 365days you would save $400 for the year. Now that doesn’t seem a lot but over a 30 year term you would be saving approx. $12,000.

Now not all offset accounts are the same and different banks have different offerings. Some have 100% variable rate offset accounts, some 100% Fixed rate offset accounts and some 75% or even 50% offset. So it’s very important to make sure the product you select meets your personal situation and is tailored to how much you would be holding in the offset account.

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