Many variable rate home loans can be organised with a mortgage offset account as a benefit. Using an offset account could help you put any extra cash to work on your home loan—even if you don’t want to use it to pay off the home loan itself.
A mortgage offset account is simply a savings or transaction account that is linked to your home loan. The more money you have in your offset account, the less interest you have to pay on your home loan. For example, if you have a $300,000 home loan and keep $10,000 in your offset account, you only pay interest on $290,000.
Often this is considered a good way to put the interest from your savings to work for you. If you kept your savings in a regular savings account, you would have to pay tax on the interest it earned. By putting that money into a mortgage offset account instead, you can save on tax and pay down your home loan sooner.
Don’t have a lump sum of money right now? You could be saving yourself money on interest simply by having your salary paid into your mortgage offset account. Because you can use it like a regular transaction account, it won’t affect your budget. By doing this, you may only be saving a small amount of interest each month, but over time it can make a big difference.