What is an offset account?
An offset accounts is a transaction account that can be linked to your home or investment loan. The credit balance of your transaction account is offset daily against your outstanding loan balance, reducing the interest payable on that loan.
Offset accounts enable you to make the most of your income and other funds to reduce the interest payable on your home loan, thereby reducing your loan term.
How an offset accounts can work for you
A mortgage borrower with a $150,000 home loan over 30 years would pay approximately $167,190 in interest.
If the borrower had an offset accounts linked to the home loan for the entire loan term with a constant balance of $10,000 in it, they would pay the loan off in 26 years and 4 months and pay just approximately $127,553 in interest.
This represents a saving of three years and eight months and approximately $38,636.95 in interest.
These figures are based on the Standard Variable Rate of 5.56% p.a. Please refer to the Hero Broker calculator to further refine savings 🙂
Simply type in your details and click “How To Save” for a refined calculation of how much you can save and get out of debt sooner.