Looking to save money on your mortgage? Learn how to make the most of your offset account with our comprehensive guide. From depositing windfalls to strategic credit card use, we've got all the tips and tricks to reduce your interest and save big on your loan.
If you're looking to save some money on your mortgage and to reduce the interest you pay over the life of your loan, then an offset account is a great option for you. An offset account is essentially a transaction account linked to your mortgage – with the balance in this account is used to offset the interest on your home loan.
Here are some tips on how to maximise the benefits of your offset account:
1. Keep Your Everyday Money in the Offset Account: The idea here is simple. Deposit your salary, savings, and any extra funds into your offset account. The more money you have in this account, the more interest you'll save on your mortgage!
2. Minimise Unnecessary Transactions: While we recommend using the offset account for everyday banking, it's best to avoid unnecessary transactions that could reduce the balance. Instead, try using a separate account for discretionary spending to maintain a higher balance in your offset account.
3. Set Up Direct Debits and Automated Payments: Automating your bill payments and direct debits from your offset account ensures that funds stay in the offset account for as long as possible, reducing the interest you pay.
4. Deposit Windfalls and Bonuses: Whenever you receive extra income, like bonuses, tax refunds, or gifts, deposit them directly into your offset account. This will help reduce your mortgage balance and save more on interest.
5. Use Credit Cards Strategically: Pay for everyday expenses with a rewards credit card to earn points or cashback. Then, use the money from your offset account to pay off the credit card balance in full each month, reducing your mortgage interest without incurring credit card interest.
6. Maintain a Separate Emergency Fund: Keep your everyday money in the offset account, but it's still important to have an emergency fund in a separate account. This ensures that you have readily available funds for unexpected expenses.
7. Regularly Review Your Mortgage and Offset Account: Check in on your mortgage and offset account periodically to make sure they align with your financial goals and that you're getting the best deal possible. You may even want to consider refinancing if you find a better mortgage offer.
8. Avoid Non-Deductible Debt: Before focusing on your offset account, pay down any other non-deductible debt, like credit card debt or personal loans. These debts usually have higher interest rates than your mortgage.
9. Consider Extra Repayments: If your mortgage allows extra repayments without penalties, consider making additional payments from your offset account. This reduces your principal and accelerates the payoff of your mortgage.
10. Monitor Interest Rate Changes: Stay informed about changes in interest rates and adjust your financial strategy accordingly. If interest rates drop, consider maintaining a higher balance in the offset account to maximise your savings.
It's important to keep in mind that how effective your offset account will be, largely depends on the mortgage product and features offered by your lender. So, if you're not sure how to make the most out of your offset account, it's always best to have a chat with us, your lender or your financial advisor.
Hopefully, these tips will help you save some extra cash on your mortgage. Happy saving!