Let’s start with a caveat: choosing a home loan that’s best for you will depend on your unique situation. Of course, you’re welcome to get in touch with us for expert guidance. But first, let’s take a look at some popular home loan features, such as an offset account and redraw facility.
Both an offset account and redraw facility offer borrowers flexibility and, if used wisely, the potential to save money. But, how do these features work?
An offset account operates like a transaction account, but with one difference: the funds in your offset account are ‘offset’ against the balance of your loan. Interest is calculated against this lesser amount, so the more funds in your offset account, the less interest you pay.
To maximise the interest-saving benefits, you may want to have your salary deposited straight to your offset account and/or any big one-off payments — like your tax cheque. And, with an offset account, you can withdraw money via a debit card, just like you would an everyday transaction account.
On the other hand, a redraw facility allows you to make additional repayments on your loan, which you can access later if you need to, for renovations, holidays, purchasing a car, or for emergencies, etc.
Making extra payments towards your home loan means you can reduce the total balance of your loan rather than simply paying off the interest.
So, how to choose?
Both of these options have distinct advantages and disadvantages. It all comes down to being smart about using them and being aware of all the fees, exceptions and tax implications (speak to your accountant on all tax matters).
Choosing one – or both – of these options means you could reduce the interest you pay while still being able to access your money regularly. You could also pay off your loan faster.
Get in touch with us to find out which home loan will suit your unique situation.