100% offset account

With 100% offset loans, an offset savings account is linked to the loan account. No interest is paid to the offset account, however the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.

Many lenders offer such facilities in line with their professional type packages.

Advantages:

• Savings interest is taxable, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill.
• The interest rate on your offset account is the same as that applied to your loan account. This is a great rate and is much higher than you could earn on most savings accounts. The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Disadvantages:

• You may have higher monthly fees attached to the account.
• You may need a minimum balance in the account to benefit.