A home loan with an offset facility is a great money saver for some people. Basically, it is simply joining up your savings account to your loan account. Then, say you have a loan of $120,000 and $20,000 in your savings account; you will only pay interest on $100,000. You earn no interest with a 100% offset account either, so that saves you paying tax on it.

Another way to save with an offset feature is to use the interest earned on your savings to help pay off your principal. Even a small amount of savings can considerably reduce your loan payments over a number of years, so an offset mortgage is worth looking into. Working in this way to reduce your debt more quickly is a good thing because debt reduction dollars are tax-free while income dollars are taxable.

Watch that your fees and interest rates for this facility are not squeezed up higher than usual for the privilege of an offset account, as some lenders like to do. Others will offer a professional package with quite low interest rates.

It is possible to have an offset account that is not 100% offset, that way you can still earn some interest on the amount that is not offset.

    Posted in Mortgage from Investor on 3. Feb. 2008