Offset your money

If you don't already have one, you might like to consider getting an Offset account. It's is an easy way for you to save money on your Home Loan, and shave years off the 30 year term. These days there are three types of Offset accounts. Whilst there are slight differences in the three types the idea is the same. Whatever money you have sitting in your offset account will mean you are not paying interest on that portion of the loan.

For an example let's say Frank has a home loan with a balance of $250 000.00 and his interest rate is currently 3.89% that means he will be charged $810.41 (depending on the number of days in the month) in interest. Because he is on Principle and Interest loan repayments his repayment is $2180 a month and $810.41 of that is the interest with the remaining $1369.59 pays down the $250 000.00 balance (the principle)

If Frank was to open an offset account and store his 'holiday savings' in it, lets say $5000.00 then the new interest he is charges is $794.20. His monthly repayment is still $2180 however he is now paying less in interest so the principle amount becomes $1385.79.

This is an example to show you that although it might not sound like a lot, over 30 years that is a massive saving in interest for you, and will shave years off the life of your loan.

So now lets take a look at the three types of Offset accounts offered by different lenders;

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