How Offset Accounts and Redraw can save you Money
Have you heard the two words that will save you money with your Home Loan, more than any other financial Strategy?
These magic words do it by actually allowing you to reduce the balance of your home loan, and therefore reducing the amount of interest charged.
Well, the two words are…
REDRAW and OFFSET!
I know that may sound a little strange:
But, stay with me and I’ll explain how it works.
Allow you to deposit spare income into your home loan account. You can then redraw a sum equal to the extra repayment amounts in the future.
In the meantime…
The extra money paid will lower the amount of interest charged while still giving you access to your money. However, there may be restrictions on how much money can be withdrawn and when. For redraw, it depends on whether the facility applies to a fixed rate or variable loan. Most lenders only allow redraw from a variable rate loan, or fixed rate loan but with limited access.
It’s important to use a home loan calculator to find out how a loan’s redraw facility works before taking it on:
The fees and restriction attached might outweigh the benefits of interest savings. Deciding between an offset account and a redraw facility on your loan largely depends on how accessible you need your extra money to be.
Are like savings accounts that function alongside your loan. You earn interest on the money in the offset account and you often have a debit card attached for simple withdrawals.
Most lenders offer 100 per cent offset facilities with 100 per cent offset accounts. You earn interest equal to the interest you are paying on your loan. Rather than earning savings account rates, You are earning home loan account interest rates on the money held within the offset account.
If you have $10,000 in your 100 per cent offset account. Instead of paying interest on your $100,000 loan, you are only paying interest on $90,000. Offset accounts, like many savings accounts, often come with account fees. But the fee may be worth the interest savings and the added flexibility compared to redraw facilities.
Finding a loan that matches your needs is a lot easier with an expert who goes to a loan calculator for the final figures.
How to make it easier:
Now, it’s important that you only enter into any loan situation when you fully understand, and are happy with how everything works.
So, if you’d like to talk to someone who can give you all the information you need about Redraw Facilities and Offset Accounts (and any other financial matter)…
Give me a call on…
0408 761 847
And I’ll be happy to put some time aside to explain how Redraw and Offset can actually make your life easier.
I am a local mortgage broker in Nerang and service all clients on the Gold Coast. I look forward to hearing from you.