For the client
Blog: Have you considered an offset account:
In Australia, we have become a lot more conservative when it comes to debt. We are living with lower levels of debt and are now looking for ways to become debt-free faster.
So how is this possible when you are living with a mortgage?
Many people are looking at an offset account and how this can benefit them. An offset account is an account that is linked to your mortgage and instead of earning interest on your savings deposit, the funds are used to offset the loan amount.
Your loan repayments will typically remain the same, but more of it is used to pay off the principal thus reducing the life of your loan and the overall amount of interest paid will also decrease.
Is an offset account for me?
The principal of an offset account is to have savings and to make these savings work for you. If you don’t have any savings, then there is little value in this type of account. If you have your salary paid directly in to your account and then use things like your credit card with 55 days interest free, you will really start to see the benefits of having an offset account.
What else do I need to consider?
If you are prone to over spending or living beyond your means, then something like an offset account may compound this problem. You should talk with one of our brokers who can work through some simple scenarios that help establish if this type of account is right for you.
For the agent
Blog: Has your client asked you about a mortgage offset account?
In Australia, we have become a lot more conservative when it comes to debt. We are living with lower levels of debt and are now looking for ways to become debt-free faster.
So how is this possible when you are living with a mortgage?
Many people are looking at an offset account and how this can benefit them. An offset account is an account that is linked to your mortgage and instead of earning interest on your savings deposit, the funds are used to offset the loan amount.
What it is important for your client to understand is that their loan repayments will typically remain the same, but more of it is used to pay off the principal thus reducing the life of their loan and the overall amount of interest paid will also decrease.
Is an offset account right for my client?
The principal of an offset account is to have savings and to make these savings work for you. You can mention this to your client and remind them that if they don’t have any savings, then there is little value in this type of account. To make the offset account work, the client can arrange to have large sums paid directly in to the offset account, such as their salary and then use things like a credit card with 55 days interest free. By doing this, they will really start to see the benefits of having an offset account.
What else needs to be considered?
If your client is prone to over spending or living beyond their means, then something like an offset account may compound this problem. The best way of establishing if this type of account and mortgage suits your client is to talk with one of our brokers. We can work through some simple scenarios that help establish if this type of account is right for your client.
If you have clients asking you about an offset mortgage, my latest blog answers some of the questions you may get from clients about this product: http://ow.ly/o2Afe