All Topics / Finance / Interest Only Loan + Offset Account Clarification

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  • Profile photo of Shiny_Suit_ManShiny_Suit_Man
    Participant
    @shiny_suit_man
    Join Date: 2012
    Post Count: 54

    Hi Everyone,
    Just after a small amount of clarification and some thoughts on my current situation. Finally just completed settlement after refinancing my IP to a different lender with an interest only loan with redraw and an offset account. Now my query is, if i add money into the offset account, if i was to look at my account listing on the online banking should the loan appear as if its decreasing? Or should the loan stay the same? Basically when i refinanced i had to open an account with that bank, at which point i set up online banking and transferred money to cover any costs involved. Now i have added more money after the loan has all been added and i can see the loan on my online banking, right next to my account. But when i add money to it the loan value doesn’t change. Which on one hand makes perfect sense because i’m not actually paying anything off the loan. But on the other hand, the idea of having an offset account is to have the illusion that you are actually paying down the loan even though you really aren’t.

    Thanks in advance.

    – Shiny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes, it shouldn't change with most banks. The offset works by reducing the interest charged so you should see the monthly interest amount fluctuate as your offset balance goes up and down.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Shiny_Suit_ManShiny_Suit_Man
    Participant
    @shiny_suit_man
    Join Date: 2012
    Post Count: 54

    Thanks Terry! I thought this might be the case but i knew someone would have the answer.

    Cheers.

    Profile photo of jamfcjamfc
    Member
    @jamfc
    Join Date: 2007
    Post Count: 19

    My monthly statement for I/O loan shows how much interest you need to pay and how much you have saved by having the offset account, it's great to see how much you're saving each month!

Viewing 4 posts - 1 through 4 (of 4 total)

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