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  Category: Articles » Finance » Mortgages » Article

5 Beneffits Of An Mortgage Offset Account

By Ben Hamilton

When considering a mortgage offset bank account, check whether your lender is offering a 100% offset. Some only provide a partial offset on your importance which means the interest on your loan is being reduced but not balanced out with the in your offset account.

If you're tired of working for your currencies, maybe it's time to get your money working for you with a mortgage offset account. This is an bank account linked to a mortgage account so that the interest earned on profits is used to minimise the attention on the mortgage.

How? Well, let's say you have a $200,000 home financial debt, and your monthly salary is $2000. With an offset bank account, your income is linked directly into your mortgage account. So instead of owing interest on $200,000, once you have been paid into your offset bank account, you will owe interest on only $198,000.

Your revenue effectively offsets the interest on your financial loan, as the interest earned on the balance of your linked account earns interest at almost the same rate as your home debt.

Banks charge interest daily, so the balance of your offset bank account is deducted from the balance of your home loan before your financial loan interest is calculated. The compound effect of the reduced interest charges can slash many years from the term of your debt.

To reap the benefits of an offset bank account, you would need to use it as your main account and have your revenue deposited directly into it. This type of account also works to your benefit when you are able to make extra repayments towards the amount of your loan.

It's important to find out what kind of access you can have to your mortgage offset bank account. Ideally, you should use it as you main bank account to make the most of the offset, so you should be able to access your funds easily. Sometimes there are transaction costs and minimum withdrawals associated with offset accounts. It's important to weigh up a number of options before deciding whether an offset account is right for you.

Generally, interest on your earnings is taxable, but because your offset account balance is used to reduce your home financial debt interest, no tax needs to be paid.

Using a mortgage offset bank account is a tax-effective way of managing your income, but it is usually only available with higher standard variable interest rate home financial debts, not the basic, lower-interest financial loans.
About the Author
Ben Hamilton is a well known specialist in helping you create a more effective and efficient financial set-up, which will enable you to get ahead in life. Being in the finance industry for over 15 years, he has access to home loans from Australia's largest banks.

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