This may be a silly question……but I'm having trouble getting my head around it.
If I have a fully variable loan on my PPOR and I have an offset account, does making extra payments from that offset account into the loan make any difference to slashing the term of the loan?
Yes and No. The offset decreases the amount of interest that you are charged in the current month, thus putting more money from your normal repayment back onto the principal ie building equity.
The term of your loan remains fixed, the time it takes for you to repay the loan will decrease.
Da Man wrote:This may be a silly question……but I'm having trouble getting my head around it.If I have a fully variable loan on my PPOR and I have an offset account, does making extra payments from that offset account into the loan make any difference to slashing the term of the loan?
what exactly do you mean,…. if you are asking if you take money that is already in your offset account will it decrease your the term of your loan then no it won't because the money in the offset account is already offseting the interest on the loan so you are receiveing the same benefit as if it were off your loan
depends on the type of offset account. Some offset accounts only take the interest earned in the offset account and decrease your loan by the lower offset account interest rate. Some offset accounts decrease your loan balance by the offset amount thus the interest rate is effectively the loan interest rate being earned on the offset amount.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
