The ongoing competition between financial lenders has led to many improvements for the consumer when considering their borrowing options. Mortgage offset accounts are just one of the ways that you can benefit from tax advantages and greater flexibility just by linking a savings or transaction account to your home loan.

The main purpose of an offset account is to reduce the interest paid and save you money. Consider that you have a $200,000 loan and $15,000 in a separate offset account. The amount in your offset will actually reduce your interest as it’s only charged against the $185,000 balance. With a decent amount of money in this account, you are eligible for a range of benefits that make offset accounts very appealing.

Save years and dollars from your mortgage

The main drawcard of having an offset account is the money and years you can shave off your mortgage. Any interest that you earn in the account will automatically offset your mortgage, so it’s like putting extra payments onto the loan. The money earned from credited interest will reduce the amount of interest you have to pay each month on your mortgage, meaning your payments are worth far more than before.

No tax burdens

When you deposit money into separate savings account not linked to your mortgage, you’re liable to pay tax on the interest earned. However, when it’s deposited into an offset account attached to the loan then any interest you earn on this won’t be taxed. With this arrangement in place, owner-occupiers are able to pay off their properties while still having access to the money if they need it.

Flexibility with your lending institution

With a decent amount of money in your offset account, you’re given greater flexibility when dealing with the lender. If you ever have issues paying for loan servicing costs, for example, you can simply use the money in your offset account without any need for discussion.

In addition, you’re free to withdraw the money at any time from your offset account without consequence, so if there’s an urgent need for a new motor vehicle or home renovations it can be done without borrowing any more from the financial institution.

Navigating the world of home loans and mortgages can be confusing, so it pays to speak with a financial advisor who knows how to get you the best performance for your money.