Offset account home loan information
Search:

Home | Finance | Mortgages

 
 

Offset account home loan information

By: Mozo

What is an offset account home loan?

An offset account home loan is a home loan package that comes with a transaction account attached. This account is called the offset account and is linked directly to the home loan. The account balance is "offset" against the amount owed against the home loan. Interest is charged on the balance of the home loan, minus the amount in the offset account, rather than on the entire amount that is owed on the home loan.

For example, a $400,000 home loan has an interest of 10%. And your offset account contains $70,000. The $70,000 is subtracted from your home loan balance ($400,000), leaving you with $330,000. Interest will then only be charged on the $330,000 rather than $400,000. That means the interest on your home loan is 10% of $330,000 ($33,000) rather than 10% of the original $400,000 ($40,000)

Offset accounts are exactly like bank accounts in how they operate and function. Offset accounts work best if your salary is directly sent to the account. You can access your account like any other bank account, via ATMs or visiting a bank branch.

There are two different offset accounts available. They include the 100% full offset account and the partial offset account. The 100% full offset account will provide the most benefits if chosen. The interest rate applied to your home loan is also applied to the bank account.

Of the two, the 100% offset is by far the more beneficial. With a 100% offset account, the same interest rate as that of your home loan is applied to the balance of your savings account. According to the example above, that means you are earning the full 12% home loan interest rate on your offset account balance.

With a partial offset account, a lower interest rate is paid on your account balance, say 7% for example. It still helps to reduce the balance of your home loan for interest calculation purposes, but to a lesser degree than a 100% full offset account.

What are the benefits?

You can save a decent amount of money when using an offset account home loan because you are making larger payments towards the principal owed. Despite the fact that your interest is calculated on the reduced amount, your monthly payment is still based on the full amount owed on the home loan. With a standard savings account, you would have to pay taxes on the amount of interest you earn. By contrast, you do not have to pay taxes on the amount of money you're saving by using an offset account. The interest earnings are not considerable taxable income because they are going towards paying off your home loan.

What are the drawbacks?

The benefits of offset account home loans are so obvious that it might seem like there could be no downside. There are, however, a couple of drawbacks to be aware of. Loans that come with an offset account sometimes have a higher interest rate.

Also, there is sometimes a minimum account balance that you must maintain in order to have the money in your offset account deducted from the balance of your loan. For those who are only able to place a relatively small amount of money into their offset account, a higher interest rate and/or minimum balance requirement might cancel out the benefits of the offset.

This article is brought to you by Mozo - find out more about offset account home loans.

Article Source: http://articlenexus.com

Mozo
Home Loans
Offset Account

Please Rate this Article

 

Not yet Rated

Click the XML Icon Above to Receive Mortgages Articles Via RSS!
Additional Articles From - Home | Finance | Mortgages
Sign Up for a free account
free pay per click
STOP Paying for Your Ads! FREE Pay Per Click!
Everything you need for your website and home business.
Adsense Site Builder
Adsense Analyzer Software
Clip Art
Domain Names
Header Graphics
Make Money Online
Photo Art
Resell Rights Products
SEO Software
Web Hosting $4.95/mo
Website Templates
Web Site Promotion Tools

AdvancedWebsiteTools.com

Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds
(Your 160x160 ad here)
Only $50 a month-click here
Link Exchange
Blog by WordPress
Privacy Policy
Terms of Service
About Us
Contact Us
Banner Advertisements
Business Reporter
Have you Victimized by a Business or the Government? File your consumer complaints or business complaints at BusinessReporter.net!
Structured Settlement?
Free information to help you learn more about structured settlements, your rights, and how to select the best company for you.
Affordable Discount Dental Plans
Choose from over 30 top-quality national and regional discount dental plans. Save 10% to 60% on most dental procedures
Classic Autos
Replica Kit Cars
Links
Bad Credit Repair
Hair Loss Remedies
Steiff Bears, Antique Bears
Model Railroading | Model Trains
Fighting Foreclosure
toe nail fungus
Free Diabetic Supplies
Antique Radios | Ham Radios
Crazy Fox Review
Herbal Remedies

отдых в Севастополеplugin wordpressрыбалкатанцевальный лагерь

Powered by Article Dashboard