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An “Offset” account is a savings account which is attached to your Home Loan Account.

It works by charging you interest only on the difference between the limit of your Home Loan Account and the Balance in your Savings Account(s).

For example, if you have a loan of $750,000, and a Savings of $50,000 your interest would be based on a $700,000 loan even though your total loan is $750,000. The amount you save over time compounds because of the fact that interest is calculated daily and it is only charged based on the frequency of your repayment (weekly, fortnightly and monthly).

To maximize the benefits here, you can also:

These accounts are not for everyone. If you are not disciplined with your money and/or do not have any savings etc. In addition, if you have other debts (e.g. HP’s, credit cards bearing interest, etc.) you should pay these off first.

Another variation of the Offset Option is a Revolving Credit – where you can also do this – however it is one account instead of multiple. It works much like a large overdraft.

If you’d like to find out how to reduce your home loan faster – get in touch!