What is an offset account？
The offset account is a bank account that is linked to your home loan. The offset account can help you pay less interest on your home loan, reduce the time it takes to pay off your loan. Let’s see how it works. As mentioned above, an offset account is a bank account, which means that you can deposit money into the account. Then the balance of the offset account can offset against your home loan amount. You only need to pay interest on the difference between offset account balance and home loan amount. The below figure shows the working principle of the offset account.
How does offset account benefit borrowers？
As shown in the figure, if you have a home loan of $800,000 and $100,000 in your offset account, you will only need to pay interest on the difference of $700,000 ($800,000-$100,000). In this way, your interest repayment amount decreases, and the monthly repayments reduce the loan amount faster. The more you save in the offset account, the fewer interests you need to pay.
Meanwhile, offset accounts have some other advantages. The $100,000 in the offset account is not frozen which means that you can access it anytime you want. If there is not a large amount of money for the offset account, considering the offset account as a daily transaction account and depositing salary regularly into the account is a good choice to lower your loan pressure, which is able to save thousands through the loan life. Besides, there is no tax levied on the offset account compared to income tax charged on the regular saving account. MoreMore Finance is always ready to assist you in offering financial plans that work best for your home loan. Don’t hesitate to contact us if you have any requirements about your home loan.
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