How do offset accounts really work?
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- Опубликовано: 10 июл 2018
- When looking for a home loan, you've likely heard about an 'offset account', but what exactly is it and why is it so popular? Generally, it's because they can, in some cases, shave years off your mortgage repayments. Here's how.
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It's a con by lenders to give you the ILLUSION of choice and savings. Giving with one hand (offset account) and taking with the other (higher interest if you want offset feature).
A better video would detail how the reduction in interest is actually calculated in detail. We all understand the simple concept, but it's the details that helps you truly understand. Eg: do they offset interest on a daily, weekly, monthly, or yearly basis? Can you actually see the reduction somehow? If it's just a conceptual idea, it's not going to help you understand what actually happens.
the interest is calculated and offset daily by the banks
love this. so easy to understand.
This is so helpful. Thank you !
Glad it was helpful, Anthony!
Hello. I got a question: So they reduce the interest charged because the money in the offset account is taken into consideration, does this happen the same in a re-draw account? i am certainly sure it does the same effect. Is there any other advantage of an offset account (over the re-draw account) apart from quicker funds accessibility?
Hi Angelo, thanks for getting in touch! You're right, both offset accounts and redraw facilities allow you to pay more off your home loan and reduce your interest repayments, but they're very different features. The financial benefit of an offset account or redraw facility will depend on a number of factors. For example, as you mentioned, money sitting in an offset account remains easily accessible and can act as your everyday transaction account, whereas you may need to make an application to withdraw money using a redraw facility, so it isn’t always accessible the same day. Offset accounts may have low or no account-keeping fees and some transaction fees, whereas a redraw fee could be charged to redraw money using a redraw facility and there could be minimum or maximum amount that you are able to redraw in a given transaction. Offset accounts often require self-discipline to save money instead of spending it, while redraw facilities enforce discipline for many people, because you have to apply in advance if you want to redraw money to spend. There's more to consider and it’s important to weigh up your individual circumstances and determine what’s right for you. This article might be of interest to you - it explains how offset accounts work in a bit more detail, including pros and cons and how they differ from redraw facilities: www.canstar.com.au/home-loans/mortgage-offset-accounts/
I had to slow the voice down plus all the visuals being 3 x the speed is really distracting.
... Good info but too rushed in my opinion
Love the visuals, I’ve just released a video explaining offset accounts too, and will release on on redraw accounts in 2 days time too for those interested in a nice, simple explanation of both/either 👍🏼
So what I'm getting at is offset accounts are the best way to retain your savings while having a home loan rather than actually repaying your savings towards the loan?
Yes pretty much.. but you paying that extra towards your weekly,monthly repayments well stop the urge of just offsetting it out. Cos redraw accounts have limits and fees
are the monthly repayments fixed and for how long?
It depends on your contract
But _why_ do lenders allow you to have an offset account? They seem to be shooting themselves in the foot by allowing you to significantly reduce your interest (if you've got the cash lying around).
Because it is in their interest for you to have a large amount of money in any account with them, this way they can use that money to lend to other people who will pay them interest. The more the better for the lender! I hope this helps👍🏼
@@dansplained42 my bank seems like not happy to open the offset account for me and he says only can open a check account for me to pay the mortgage. What I can do to make it happen. Thank you!
@@moon8433 I would speak to another bank. Also find out why they won’t let you open an offset account. You may not meet the requirements for that particular bank. Or perhaps they don’t offer offsets. Your best bet is to speak to a few banks and weigh up your options
Maybe
Hi, the voice over covers too much information in a short period of time, everything is too rushed
BEWARE - ALL OFFSET ACCOUNT DON'T OFFER 100% OFFSET, SOME OF THEM OFFER AS LOW AS 40% SAVING INSTEAD OF 100% SAVINGS ON INTEREST THAT YOU PAY TO BANKS! HOPE THIS HELPS SOMEONE! BANKS ARE JUST TOO SMART...
Thanks for posting it but you explain way too fast
I’ve made a video on my channel if you’d like another explanation which a nice simple breakdown ✊🏼
Good but it would have been easier if it was just slides (with pictures) instead of hand drawing while the explanation is given. Very distracting
Couldn't she have taken that 10,000 and put it in an index fund and made 10% and used that t pay off the loan?
Theoretically yes, however that then means she would be subject to risk and tax.