hi,
Just want to know whether there's any extra fees or surcharge in having a 100% offset account with your Interest only loan? Like is there a monthly fee or a minimum amount you need to have in your account or transaction charge every time you want to use the money in your offset. Can I use my offset account as a daily account or do I have to transfer money from my normal account to the offset? Because i was under the assumption that paying IO with offset is exactly like paying P & I with the exception that the principle is paid into the offset and is accessible at all time, didn't know that there's a fee attached to it. All these factors added together is offset better than paying P & I?
Hi Althea
This is a hard one to answer as the response will vary from lender.
In essense with most lenders who offer such a product it is a normal fully transaction savings account that you can use for everyday use and still have the benefit of having the interest you would have received being offset against the interest you have been charged. Interest is earned at the same rate as you are bing charged for the home or investment loan however there are no tax implications on declaring the interest as it is not actually received.
Some lenders Commonwealth, St George, Adelaide Bank to name a couple have a either a non transactional or quazy offset account which is nowhere near as good and can still cause you problems with interest redraw.
A lot of lenders charge a monthly fee for such a product hence it pays to shop around.
Your mortgage broker will be able to give you a list of products out there but regretfully unless he a licensed financial planner he cannot talk to you about the benefits of an offset account as he is unable to offer financial advice.
Richard Taylor | Australia's leading private lender
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