All Topics / Finance / What is an offset account?

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  • Profile photo of daltoid21daltoid21
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    @daltoid21
    Join Date: 2004
    Post Count: 3

    Could someone explain to me in plain language what an offset account is.

    Thanks
    Heather

    Profile photo of Mobile MortgageMobile Mortgage
    Member
    @mobile-mortgage
    Join Date: 2003
    Post Count: 913

    Hi Heather,
    A 100% offset account is a separate savings account attached to your loan.
    Any money you put in the offset account is deducted from the loan balance before interest on the loan is calculated.

    Regards
    Steven
    Mortgage Broker

    [email protected]
    http://www.mobilemortgagemarket.com.au
    Ph:1800 820 500
    VICTORIA

    PLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.

    Profile photo of RugbyfanRugbyfan
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    @rugbyfan
    Join Date: 2003
    Post Count: 683

    Basically it is an account linked to your home loan whereby if you have say a $100,000 loan on a property, you get your fortnightly pay put into it. You also have a credit card that you use for EVERYTHING. You get a 60 day interest free period on the card so as long as you pay it off when required, you get to use the 60 days of wages or approximately $8,000 off the principal. Ie you will be charged interest in that final week on $92,000 not $100,000.

    Loan $100,000
    Interest at 7% from day one $134 a week
    Week 1 principal $100,000 (less $1000 wages in offset account)
    Interest reduced to $133 a week.

    Not much there but by week 8 at the end of your interest free period:

    Week 8 principal $100,000 (less $8,000 wages in offset account)
    Interest reduced to $123 a week ($10 saving)

    It only works if you pay of the credit card before the interest kicks in.

    “Life is not a journey to the grave with the intention of arriving safely in a handsome and well preserved body, but better to skid in sideways, thoroughly used, totally worn out and loudly proclaiming . …… Hell, what a trip !!”

    Profile photo of gatsbygatsby
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    @gatsby
    Join Date: 2003
    Post Count: 708

    I thought the same until today when I went to my bank and was told my offset account was a savings account on 2 properties that I own which I don’t have to make any repayments on? Thanks Steve (again!)for sorting out the mess (lol). And to think this is just me trying to refinance! I bet you can’t wait until I’m ready to buy a commercial property next! “Steve, it’s Gatsby,….hello?,…..hello,………….?
    Thanks again mate!,
    You gotta laugh!
    Cheers,
    Gatsby!

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