The term ‘offset loan’ applies to a home loan with an offset facility. When you take out an offset loan, you will open both a home loan and an everyday transaction account with the same lender. The money that you have in the transaction account on any given day is calculated as an offset to your home loan. Effectively, it is as if you have used everything in your savings account to pay off your home loan, yet you have access to your money instantaneously, through all the regular withdrawal channels.
What to consider:
What to consider:
- Offset accounts generally run at a higher interest than non-offset accounts.
- Do you keep a substantial balance in your transaction account week to week – enough to make a difference to your interest payments?
- Will you be keeping the offset loan for long enough to make a saving on it, or do you plan to re-mortgage later on?
- If you are in a low-risk, high-income borrower category, you may be able to get an offset account at a reduced price.
- If you keep a substantial balance in your transaction account you pay your loan off faster
- The advantages of a redraw facility, but with easier access to the money
- Higher interest and higher initial fees
- Savings are greater over a longer period of time
- There are often additional terms and conditions set by lenders
