What Is A Mortgage Offset Account?
Taking The Difference
Think of a mortgage offset account as a mix between a savings account and a home loan. An account is set up and linked to your home loan, while in a normal savings account, you may receive interest and on a home loan you would normally be charged interest. A mortgage offset account is devised so that you only pay interest on the net balance of your home loan and your savings account.
Tax Benefits For Mortgage Offset Accounts
One popular benefit of a mortgage offset account is the savings on tax that can be made. Australians are required to pay tax on the interest that is earned on any money in their savings accounts. With an offset account, you dont actually earn any interest, you save interest on your home loan. This means you can avoid having to pay that particular tax.
100% Offset
When choosing a mortgage offset account, try to choose one that will offer a rate of 100 per cent, allowing you to offset the full balance of your savings account against your home loan. Some lenders may require you to have a minimum balance in your savings account before you can offset your home loan, so shop around for the best deal.
If you have decided that this is something that could suit your circumstances, you should research different types of mortgage offset accounts very thoroughly. Unfortunately, sometimes lenders capitalise on the benefits of these particular accounts and try to charge a higher interest rate on the loan.
Therefore, in order to get the full range of benefits, you will have to gather lots of information, ask the right questions of your lender and make sure you are 100 per cent clear on the ins and outs of the accounts. That way, youll be absolutely certain that the lender and account is working for you and not the other way around.
by: Elizabeth Mclean
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