{"id":5479,"date":"2024-09-05T09:47:55","date_gmt":"2024-09-04T23:47:55","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5479"},"modified":"2024-09-05T09:47:55","modified_gmt":"2024-09-04T23:47:55","slug":"the-home-loan-feature-70-of-new-borrowers-are-hooked-on","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/the-home-loan-feature-70-of-new-borrowers-are-hooked-on\/","title":{"rendered":"The home loan feature 70% of new borrowers are hooked on"},"content":{"rendered":"

\"\"When it comes to home loan features we\u2019re spoiled for choice. Even basic loans can come with a fisherman\u2019s basket full of options. But one feature in particular is being targeted by seven out of 10 home buyers.<\/strong><\/p>\n

Faced with high interest rates and a cost of living crunch, home owners in droves are using home loan offset accounts to their advantage.<\/p>\n

One of the nation\u2019s biggest banks, NAB, reports that\u00a0almost 70% of new home loan customers are opting for an offset account<\/a>, up from 50% just two years ago. And it can help them save on interest.<\/p>\n

How do offset accounts work?<\/h3>\n

An offset account is typically an everyday account (or multiple accounts) linked to your home loan.<\/p>\n

You won\u2019t earn interest on the money stored in the offset account\/s. Instead, the balance is deducted from, or \u2018offset\u2019 against, the balance of your home loan when loan interest is calculated.<\/p>\n

Say for instance you have a home loan of $400,000 and $20,000 in the linked offset account. You\u2019ll only pay interest on $380,000 ($400,000 less $20,000).<\/p>\n

This can reduce your monthly interest costs. And as your monthly repayment amount stays the same, more of each regular repayment goes towards paying off the loan balance. That is: more of your repayment amount goes to paying down the principal component of your principal + interest loan.<\/p>\n

This in turn further reduces next month\u2019s interest cost, too.<\/p>\n

In fact,\u00a0Macquarie Bank calculates<\/a>\u00a0that based on the above scenario with $20,000 in your offset account over the life of a 30-year loan (with an interest rate of 6%), you can save more than $87,000 in interest, and shave more than three years off your loan.<\/p>\n

Even better, money in the offset is usually available to withdraw if needed \u2013 so the cash can be made available for unexpected bills.<\/p>\n

How to use an offset account to your advantage<\/h3>\n

The bigger the balance of your offset account, the more you\u2019ll likely save on loan interest.<\/p>\n

According to NAB, one way to grow the value of your offset account is with a \u2018three Cs\u2019 strategy: crediting, consolidating and cutting back where you can.<\/p>\n

Asking your employer to \u2018credit\u2019 your salary directly into the offset account could help maintain a higher balance.<\/p>\n

If you have cash stored in a savings account, you could consider \u2018consolidating\u2019 it into your offset account. You may be able to earn interest of up to 5% on a savings account but if your mortgage rate begins with 6%, chances are you\u2019ll save more with an offset account than you\u2019ll earn on a savings account. Plus, interest savings in an offset aren\u2019t taxed.<\/p>\n

Meanwhile, \u2018cutting\u2019 back household spending where possible can help you boost the balance of your offset account to improve interest savings.<\/p>\n

It\u2019s an approach being used to great effect by plenty of home owners. NAB reports a 55% increase in the value of its offset accounts since the pandemic \u2013 rising from $29 billion in 2020 to more than $45 billion today.<\/p>\n

Is a home loan offset account right for you?<\/h3>\n

Despite the popularity of offsets, they may not be a suitable choice for everyone.<\/p>\n

An offset home loan\u00a0can sometimes come with a higher rate<\/a>\u00a0than a more basic loan, and unless you consistently have a reasonable balance in the linked offset account, you could end up paying more than you save in interest.<\/p>\n

Also, the money you store in an offset account could be used elsewhere as an investment \u2013 so it\u2019s worth weighing up whether to prioritise reducing your home loan now or investing for the future.<\/p>\n

If you\u2019re not sure where to begin, contact us today to find out if a home loan offset could help you get ahead with your mortgage and save on interest.<\/p>\n

Disclaimer:<\/strong>\u00a0The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.<\/p>\n","protected":false},"excerpt":{"rendered":"

When it comes to home loan features we\u2019re spoiled for choice. Even basic loans can come with a fisherman\u2019s basket full of options. But one feature in particular is being targeted by seven out of 10 home buyers. Faced with high interest rates and a cost of living crunch, home owners in droves are using […]<\/p>\n","protected":false},"author":23,"featured_media":5480,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[110],"tags":[],"class_list":{"0":"post-5479","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-home-loans","8":"entry"},"yoast_head":"\nThe home loan feature 70% of new borrowers are hooked on · FinancialPlus Mortgage Broker Gold Coast<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/financialplus.com.au\/the-home-loan-feature-70-of-new-borrowers-are-hooked-on\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The home loan feature 70% of new borrowers are hooked on · FinancialPlus Mortgage Broker Gold Coast\" \/>\n<meta property=\"og:description\" content=\"When it comes to home loan features we\u2019re spoiled for choice. 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