Offset account

It would depend on how much money you are going to have sitting around. If you have a bit then you could tax interest on the offset. You could save the same amount of interest by putting the money into the loan and using redraw later – but you will run into large tax issues down the track – so you need to work out how much interest you would save vs how much extra tax and problems you would create.

I would also recommend IO loans too.

Hi Clareow – welcome to the forum.
As Terry has mentioned, it all depends on how much money you have 'sitting around' as to how an offset account may work for you.

I assume when you say you have seen 'One direct on line accounts' you are talking about the actual homeloan, and not their savings accounts? (unrelated)

The easiest way to work out if an offset account will work for you is by understanding how it works.

You have a savings account, that is associated with your homeloan, so that the daily balance of your savings (the offset) account,  offsets the days balance on your homeloan, effectively reducing the interest you are charged, and more of your payment goes towards the principal of the homeloan that way.
The negative, is tha most lenders only offer true offset accounts on their
standard' loans, which unless included as part of an annual package arrangement, to get a disocunted interest rate also, will be at a higher interest rate than a basic loan, such as the one you mentioned.
If you pay all your income into your offset savings account, and then pretty much empty it as soon as it goes in, it will not work for you at all.

An example to help, would be lets say you 'average' a daily balance over a calender month of $2000 in your account (many folks liekly will not average this either……)

aasume your loan is 6.7% interest, calculated daily, the offset account homeloan will save you $2.50 per week in interest….

Lets say your loan was for $200k – if you had it as part of a cheaper interest rate loan, at say 6%, with no offset account, you would save almost $27.00 per week in interest. So in this case, the cheaper loan is far superior for you.

OBviously it works out differently if you had a higher account balance, and the interest rates were 'closer', but hopefully that gives you an idea.

If you had $50k lying around in your offset account, it is the same efect exactly as if it was 'in' the loan, but obviously has the tax benefits already mentioned above, and allows for greater flexibility if your circumstances change.

where an offset account is perfect, if your interest rates are similar with or without, is that you would  have all income staying in your offset savings account for as long as possible, live off a credit card for the interest free period, and then pay it off in full each month from your offset account, and then start the cycle again – this will save you interest over the life of your loan, and thus shorten the loan term on a principale and interest homeloan..

While I think of it, I notice a few lenders on their websites or blurb (non bank/non deposit taking lenders) talk about their loans having 'loan offset' – but this is very misleading – all they mean is you can 'offset' your interest by putting more money into your homeloan – doh – genuises! Dont be confused with that…..

all the best with your new home.

Cheers

Hello claireow

Using your information in the above post, the maths is not hard.
Basically, assuming IO loan to make life easier for the calculation.

$480,000 X 6.15%  = $29,520 interest per year

( $480,000 – $10,000 (in offset account))  X 6.95% = $32,665 interest per year

Seems like a no brainer if your intention is only to buy one house to live in.
If not there may be other things to consider.
 
Cheers
Elka

But the question is do you have the 15 working days or so to spare whilst Anz have a look at your application.

Personally wouldnt touch either lender at the moment as the customer service levels (and they are not alone) are absolutely shocking.

Clare

Would need to now more about the whole deal first and your specific requirements and needs before recommending someone.

At that LVR on loan amount I would be looking more at the Mortgage Insurance premium each lender will charge rather than whether you will save a 0.01% here or there.

Over $500K the premium rates will start to climb with some lenders (depending on which one of the insurers they use) and could vary between 1.97% and 2.57% (just checked 2 lenders scales at $500K and 90% LVR) of the loan amount whilst other lenders may not charge LMI and charge a risk fee which may reflect a cheaper overall price.