Save $1,545 with an offset account | Dollar Saver #57
Save: Up to $1,545
Tip overview:
By putting $10,000 in a home loan offset account you could save $1,545 a year in interest charges.
Interest rates have risen rapidly over the last 18 months. This has made home loan repayments much more expensive. But there's one silver lining.
When interest rates are high, money you save in a home loan offset account saves you a lot more interest.
Did you know?
The average Australian with an offset account saves over $100,000 in it.
Here's how it works: an offset account is a bank account linked to your home loan. Every dollar saved in an offset account reduces your loan principal.
Your monthly repayments stay the same, but your lender calculates your interest charges minus the money in the offset.
This means you pay off the loan faster and pay less interest.
Here's an example calculation:
- Let's say you have a $600,000 home loan (this is close to the Australian average).
- Your loan is for 30 years and your interest rate is 5.90%.
- At the start of the loan you put $10,000 into the offset account.
- If you never touch that $10,000, you'll repay the loan 1 year early and save $46,350 less in interest.
- That's $1,545 a year.
Not every home loan comes with an offset account. And if yours doesn't, refinancing to one that does could be a great money-saving move.