Do I have to have a minimum amount in my offset account?

No – you usually don’t need to have a minimum amount in your offset account, but the higher balance you have, the larger your interest savings will be. Use our offset loan calculator to see the effect of having more money in your offset account. It’s important to note that since home loan interest with an offset account is calculated daily, even if your monthly balance goes down towards the end of your pay period, you’ll still be reaping the rewards of reducing the overall interest outlay.

Can I have more than one offset account?

Not usually – most lenders will limit you to one offset account per loan, although if you have a split rate home loan with two separate loan accounts, you may be permitted to have one offset account for each portion of the split.

Can I have my wages paid into my offset account?

Yes, you can – this is a very good practice to make your wages work harder for you. In the early part of your pay period, almost all your wages will be used to offset your loan. As you pay bills and withdraw money from your offset account, the balance will reduce, but you’ll still be far better off overall using an offset account in this way.

Does an offset account reduce my monthly repayments?

No – as you’ll see if you play around with figures in Savvy’s offset account mortgage calculator, the repayments you make on your loan will not be affected by the amount you have in your offset account. However, the interest you pay daily will reduce in proportion to the balance of your offset account.

How is the offset amount calculated when it changes from day to day?

The interest you pay on your loan is calculated daily by your lender. Therefore, when this calculation is made, the balance in your offset account is also added to the equation daily. For example, using a loan of $500,000 with a 3% p.a. interest rate, the daily interest calculation would be: ($500,000 x 0.03) divided by 365 = $41.10 interest per day With a $50,000 offset account, the calculation would be: ($450,000 x 0.03) divided by 365 = $36.99 (per day interest)

Can an offset account be linked to a fixed rate home loan?

Yes – offset accounts can be linked to either variable rate or fixed rate home loans , although a fixed rate loan with an offset account is much rarer than a variable rate with one. Fixed rate loans tend to offer a lower interest rate in return for less repayment flexibility. These are more likely to come with caps on how much you can contribute each year compared to accounts attached to variable rate home loans.

Can I use an offset account and make additional repayments at the same time?

Yes, you can combine interest-saving features and make an effective dent in your home loan principal. Combining additional loan features such as using an offset account and making additional repayments is a sure way to pay off your loan as quickly as possible and reduce your interest considerably.