Should I get an offset account?
It is very common for people to have heard from friends or parents that an ‘offset account’ is the go these days as it helps you save on interest repayments.
It is true – they do – but only under the right circumstances.
Offset accounts are great when you are:
Borrowing a lot of money; and / or For those with a big chunk of savings or equity in their home; and/or If you are a good saver. But unfortunately, most first home buyers don’t fit this profile.
Having a home loan with an offset account may mean that you pay an annual fee of several hundred dollars a year and you may have a higher interest rate on your home loan.
So you need to understand if you are financially better off – or not – paying for it.
The cost to someone who makes this mistake can range from hundreds to many thousands of dollars a year.
What is an offset account? An offset account is usually a transaction account that is linked to your mortgage. Any money in the account reduces your mortgage debt balance so that you end up paying less interest on your home loan.
You would keep your money / savings in your offset account instead of putting it in a high interest saver account because the interest rate on your home loan is higher than the one on your high interest saver.