Although most people refer to this type of product as a loan, it is often called a product feature by lenders within a particular type of loan. Hence what you are getting is a feature attached to your loan called an offset account.
In the majority of circumstances, your offset account is also your everyday transaction account.
What is an Offset Account ?
When you take out a offset loan, you are given an offset account /savings account with the particular financial institution with an offset feature.
For example, if you took out a loan for $200,000, you could have a 100% offset account with that loan. If you were to deposit say $10,000 into the 100% offset account, then the money in the offset account will offset against the home loan, thus saving you interest. In this case therefore, you will be charged interest on $190,000.
This type of account immediately uses the savings in your transaction account to save you interest charged to your home or investment loan.
Do all types of loans come with an offset account?
Only standard variable loans, honeymoon loans, professional packages, and some fixed loans come with offset accounts. It is worth noting that not all lenders offer this or a combination of these types of loans.
Can I get a 100% offset loan with a fixed loan?
This is possible with only 2-3 financial institutions. This is a very popular option with investors who like to guarantee their interest rate, yet use excess money in their savings offset accounts to minimize their interest bill. The flexibility of this type of loan is that the account is a 100% offset and the user can redraw or take out that money at any time without any penalties or fees. In most cases, the offset account is also your everyday transaction account.
At Mortgage Providers, our consultants are familiar with all types of offset loan features available with various institutions. Our consultants can package these types of loans negotiating a better interest rate than advertised, to suit each client’s needs. Call us on 1300 656 600 or enquire online today!