Loan Types

100% Offset Loans

If you like the idea of a Line of Credit, but feel it is too easy to withdraw your funds, then this is the loan for you. You'll have two accounts – Home Loan account – 100% offset savings account. The offset savings account is linked to your home loan account. No interest is paid to the offset savings account but instead the balance of your offset savings account is deducted from your home loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.

It works like this (example):

• Your current home loan balance is $200,000
• You have $10,000 in your 100% offset savings account

You would only be charged interest on the difference i.e. $190,000. This means you’ll pay less interest and reduce your initial loan term.

Benefits

• Money is easily accessed from your offset savings account
• Because your offset savings account earns no interest you have no tax implications, so you are effectively reducing your tax bill
• The effective interest rate on your offset savings account equates to the same rate as the home loan account. This is a great rate and is much higher than you could earn on most savings accounts. This also means the interest rate moves with your home loan rate ensuring you get maximum benefit from every dollar in your offset savings account
• By placing your salary and savings into this account you will dramatically reduce the interest and term of your home loan

Pitfalls

• Interest Rate – Usually higher than a No Frills Loan, yet it is lower than a Line of Credit Loan