An Offset Account is a deposit account linked to the loan. The benefit being that any surplus funds that you might have, for example rental income or your pay, can be deposited into the account, offsetting the daily interest charged on the total loan amount. An Offset Account is generally not a loan that an investor would use on an investment property, but rather on their family home in conjunction with an investment.
As an example – if the loan amount outstanding is $100,000 and there is $5,000 in the offset account, the interest that is charged on the loan will be calculated on $95,000. As a result, the home loan is paid out at a faster rate. This is because the standard monthly repayment has been calculated on the full amount outstanding.
Offset Account loans vary in the amount that is offset. Some lenders may offset only 50% of the funds held in the account, whilst others offset the full 100%. You need to pay attention to ensure that you get the best loan for your needs and seek proffesional advice.
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