Buying a home
Home loan offset account: how to make it work for you
25 June 2020
An “offset account” may sound like another confusing home loan term, but having one could potentially shave years off the life of your loan. How? Well, when you keep money in a savings account linked to your home loan, it can reduce the amount of interest payable on your loan. So, if you want to get the most out of your home loan, an offset account may be right for you.
What is an offset account and how does it work?
An offset account is a type of savings or transaction account that’s linked to your home loan. The account balance is offset against the daily balance of your home loan. This means that the account balance is subtracted from the amount on which you have to pay interest.
If you have a few different accounts linked to your savings – like our Everyday Options Sub-Accounts – they can all offset your home loan too.
Say you have a $10,000 in your Suncorp Everyday Options Account, and $100,000 owing on your Suncorp Standard Variable Rate Home Loan. If your Suncorp Everyday Options Account is linked as an offset account to your Suncorp Standard Variable Rate Home Loan, when we calculate the daily interest on your loan, we’d subtract that $10,000 from the $100,000 owing on your loan. This means you’ll only pay daily interest on $90,000 (while that $10,000 remains in the offset account).
When you might use an offset account
An offset account works well if you generally keep larger sums of money, like your savings, in the account and want to able to access this money at any time. The larger the amount in your offset account, and the longer you keep it there, the more your offset account could save you.
Home loans with a redraw facility
As an alternative to using an offset account, you could consider a home loan that allows you to redraw money. Rather than keeping a large sum in your savings account, you could make extra payments into your loan on top of your regular ones. A redraw facility, known as Home Loan Cashback, allows you to take back those extra payments when you need to. But, a redraw facility is much harder to access than an offset account.
Choosing whether an offset account is right for you
Offset accounts generally work best if you have a large amount of savings. If you dip in to your savings frequently or your balance is never more than a couple of thousand dollars, an offset account may not be right solution for you. This is because the interest savings on your loan from the offset will be minimal. Coupled with higher interest rates and fees and charges, an offset account may not make sense for your situation.
Our offset calculator can help you decide. Make sure to enter your offset amount in the ‘Extra repayments’ tab.
Seek professional advice
Whether you’re refinancing or you’re a first home owner, knowing what is best for your circumstances can be difficult. That’s why it’s best to speak to a Suncorp Bank Home Loan Specialist to help determine what options are best for you.
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