[BlueMeanie]

Does anyone use an offset account and find that it saves them money?

Looking at most of the banks, it seems that the privilege of an offset account costs ~ $15 a month, plus ~ 0.7% extra interest, compared to a fee free, unlimited redraw, no-frills loan.

Everything I have read has said that offset accounts are the way to go because they can save you thousands of dollars, but my calculations say it would cost me a significant amount. Have I got something wrong?

ps. We don't have plans to use the property as an investment down the track.

[jen88]

i'm certainly no expert but we have an offset account that has no fees and I get a very good rate on the loan. It saves thousands in interest, but I guess that depend how much $ you are anticipating being in that account each month.

[Soprano-Cat]

The money saved is on the interest.

Say, loan of 300,000.
Offset has $20,000 in it.

interest is calculated on 280,000, thus saving you X dollars.

so even with a little extra fees and a smidgy higher rate, you can save money.

I'm not sure of the difference paying extra off the mortgage though, my knowledge isn't that good!

[cassi8]

The idea is that you use the offset as a savings acct so any money in there effectively reduces your mortgage balance and therefore reducing the interest charged on the balance. Over the long term the savings can be substantial and the money is still available if you need it for something.

I have one and it works for us. The interest rate is still very competitive with other standard variable rates and the offset savings more than cover the annual fee.

[Bek+3]

We use to have an offset account. It was free and offset 100%.
The bank then started charging us $15 a month so we got rid of it and just put our money directly onto the mortgage with the option to redraw anytime for free.
Now they want $50 every time we redraw and it's no longer free.

I am fed up with my bank so we are looking to remortgage with another. Many banks though have free 100% offset accounts. It's probably easier to go with offset rather than re-draw because you can put your wages and everything into it and have it separate at the same time whilst saving you interest. If they are going to slug you $15 and 0.7% though I'd either a. find a different bank or b. go with the free redraw option.

[lsolaBella]

Like PP we have professional package which has reduced interest rate and had he annual and monthly fees waived. We also keep decent money in the offset account.

So yes it does save us money. In 5yrs we reduced our mortgage by an extra $30 k.

[wannabe30]

I think it depends on whether you hAve any extra money leftover after paying the mortgage each month. For us, we have a substantial amount in savings, which we add to each month. All that money sits in the offset/redraw and saves us far more in mortgage interest than we would ever make if we invested it.

However, if you don't have a lot of extra (either in existing savings or as "leftover" after each month's mortgage payment comes out) you are probably better off with a lower fee account.

Also, it's worth looking around for a better deal. We pay a yearly fee ($350??) for offset, redraw and credit cards, but we have no monthly fees and certainly don't pay any more interest for the privilege.

[Bek+3]

Everything I have read has said that offset accounts are the way to go because they can save you thousands of dollars, but my calculations say it would cost me a significant amount. Have I got something wrong?

Neither of them will 'cost' you any money, they will both save you money in interest that you pay.

One may 'cost' (or rather save you less money) than the other though if the offset has fees and a higher interest rate than the other mortgage that offers free redraw.

[SeaPrincess]

It very much depends on the bank or loan package that you have. When we first took out a mortgage, the bank we went with told us that the extra interest and fees to have an offset account would only be worth it if we always had at least $10,000 in the offset, vs their fee-free no-frills package with free re-draw. The only catch at the time was that the minimum re-draw was $2,000, but now it's only $500.

We currently have a Breakfree package with ANZ, which is good - offset and free redraw.

OP, look around some more, or speak to a mortgage broker. You should be able to find something better, otherwise I would go for the no frills and free redraw.

[Pearlberry]

We have both an offset and redraw. The offset is our everyday account and can have anything down to zero in it.

In addition just after we get paid, we put a good chunk of money into our mortgage (pay yourself first ;-)). We have agreed that money is only to be withdrawn to buy assets (investments).

We have still saved a lot of money from having the offset.

Ours is fee free for withdrawals and having the offset. We don't have monthly fees. Shop around and negotiate with the banks. Remember, they want your business.