The benefits of an offset home loan

Are you interested in paying less on your mortgage every month? An offset home loan might help you do exactly that.

An offset home loan is surprisingly simple to use. You link a transaction account to your home loan, and the home loan balance will include the daily balance of the linked (offset) account, and potentially reduce how much interest you pay. It's that easy!

Need more convincing? Here are three reasons you might want an offset home loan in your future.

1. Your money, your way

An offset home loan linked to a transaction account offers flexibility, as you can decide how much of your funds are offsetting your loan balance at any given moment by moving money in and out as needed, just like any other account.

The end of day balance is calculated against your home loan, so by maintaining a higher balance, you can potentially reduce the amount of interest paid on your home loan each month.

2. Pay your loan faster

If you’re interested in interest, here’s another interesting fact for you - paying less interest means you’ll potentially pay more of the borrowed amount each month (known as your ‘principal’). When you take this into account, it’s easy to see that the more you offset against your loan balance, the quicker you can repay your loan.

For example, if your offset home loan has a loan balance of $300,000 and the linked transaction account has a credit balance of $100,000, interest will only be charged on the difference – which in this example is $200,000.

So, if the current interest rate on your home loan is 6.30% - you can potentially save $6,300 in interest over a year.

You also have the peace of mind in knowing the money is there in your transaction account if you need it, but while you don’t, it can help you pay off your loan faster.

3. Work smarter not harder

There are some smart ways to maximise an offset home loan and one of the most popular is using it in conjunction with a credit card and its interest-free periods.

Using a credit card with a long interest-free period means you’ll be able to keep your money in your linked account longer. By doing this, you can use the credit card for your daily needs, leaving money in your transaction account linked to your offset home loan longer, reducing your interest repayments and allowing you to save the maximum amount for the longest period of time.

These extra days, weeks and months could add up to quite significant savings over the lifetime of your home loan. If, for example, you had a credit card with a 55 day interest free period, you could put all your expenses on this card without spending a cent out of your bank account until the closing balance is due. As always, please ensure you understand the terms and conditions of your credit cards as every financial product has different rules around it.

Savings will differ from person to person using this method, so if you want more information, talk to one of our home loan specialists by contacting us here.

Two birds with one stone

An offset home loan can give you the ease of convenience, alongside reducing your potential interest, helping you build a more successful financial future.

If you’re looking for more information on offset home loans today, call a BankVic Lender on 13 63 73

Information in this article is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether it is appropriate for you before acquiring a product or service. Police Financial Services Limited ABN 33 087 651 661 - trading as BankVic | AFSL and Australian Credit License 240293.