What is an offset account?
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How does an offset account work?
What are the benefits of an offset account?
What should I consider before deciding if an offset account is right for me?
Can I get an offset account with RedZed?
Considering taking out a home or commercial loan but feeling a bit out of your depth? If you’re new to the world of finance, it’s natural to feel overwhelmed by the minefield of technical information and big decisions that loom ahead.
If all the jargon, acronyms and loan features have your head in a spin, it might be time to enlist the help of a mortgage broker. At RedZed, we have over 5000 broker partners who can guide you through the loan process step by step.
In the meantime, we’ll get you started by sharing five fast facts about offset accounts to help you better understand this specific loan feature and how it might benefit you
An offset account is a facility linked to your loan.
2. How does an offset account work?
When you make additional payments to your loan, you can transfer these into the sub-account which is "offset" against your loan balance and reduces the amount of interest you pay on your loan.
Typically, this means that instead of being charged interest on your total loan balance, you’re only charged interest on your loan balance minus the balance in your offset facility. For example, if your loan balance is $500,000 and you have $50,000 in your linked offset sub-account, you will only be charged interest on a loan balance of $450,000 ($500,000 - $50,000 = $450,000).
3. What are the benefits of an offset account?
Broadly, an offset reduces the amount of interest you’re charged on your principal and interest home loan. As a result, more of your monthly loan repayment goes towards paying down the principal, reducing your loan balance faster.
4. What should I consider before deciding if an offset account is right for me?
There are many things to consider because offset accounts (and personal circumstances) can differ, such as:
Fees
Offset accounts may come with fees, so find out if any additional costs are involved and weigh up whether having an offset account is the right loan feature for your circumstances.
Type of offset account
Find out if 100% of the offset account funds will be used to offset the loan balance or if only partial offset accounts are available.
Savings approach
Do the math - will you save more money using an offset account to reduce the interest payable on your home loan, or would your savings be better off accruing interest in a savings account?
5. Can I get an offset account with RedZed?
RedZed offers customers the option of an offset sub-account (OSA) with its residential and commercial loans, allowing greater flexibility and convenience when managing your money.
An offset sub-account works a little differently to a standard offset account. It is not a separate deposit or transaction account, but rather an account that holds any additional loan repayments you make on your RedZed loan. These funds lower the interest you have to pay on your loan balance, while giving you the flexibility to use the extra funds when and how you choose.
The OSA must be linked with an individual loan, offering its benefits and functionality exclusively to that linked loan.
With RedZed’s offset sub-account, you can:
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Transfer additional loan payments into your linked OSA, reducing the amount of interest payable on the linked loan account |
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Make outbound payments via BPAY® or the “Pay Anyone” feature |
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Choose to have individual linked offset sub-accounts for each loan |
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Manage your finances easily via the RedZed Connect web portal or the RedZed Connect mobile app |
Plus, RedZed’s OSA feature does not incur additional RedZed set-up or ongoing service fees!
To learn more about RedZed’s offset sub-account feature, click here, contact your local mortgage broker or call our team on 1300 722 462.
The above information is a brief summary only and does not take into account your personal needs and is not a substitute for independent professional advice. We strongly recommend that you speak to your accountant as they will be able to provide you the most suitable advice for your individual circumstance and to ensure that you are also always receiving the most up to date information.
