Using an offset account to help pay your mortgage faster

There are lots of smart things you can do to help pay off your mortgage faster. One way is to be strategic with the way you do your everyday banking by switching to an offset account. Here, we give you some tips to help you make the most of an offset account.

What’s an offset account?

An offset account can help you reduce the interest you pay on your home loan. It works like any normal transaction account, except it’s linked to your home loan.

Any money you have in your offset transaction account is ‘offset’ against the balance in your home loan account, reducing the amount on which interest is calculated on that day. Interest on your home loan balance is calculated daily, so the more money you can keep in your offset account each day, the more your home loan interest will be reduced.

Tips to make the most of an offset account

Keep as much money as possible in it

This might sound obvious, but the more money you have in your offset account, the more your home loan interest will be reduced.

Get your salary paid straight into your offset account

This way, it will be offset against your home loan on the day you get paid.

Use a credit card for daily expenses

This means you can leave more of your money in your offset account so you get charged less interest on your home loan.

To avoid being charged interest on the credit card, make sure you pay it out in full before the due date or at least pay the minimum payment to avoid any late payment fees. After all, you don’t want to cancel out any potential home loan interest savings with credit card fees. If you have a credit card with Bankwest, you can also use Bankwest Easy Alerts in the Bankwest App to receive an alert before your credit card payment is due.

Use more than one offset account

Often, you can have more than one offset account, which gives you options for managing your finances the way you want to.

What to watch out for

  • If you’re using a credit card, be careful. Over-spending on your card can lead to financial difficulty, and not paying it off on time will incur a much higher interest rate on your card compared to the interest rate you pay on your home loan. This will cancel out the benefits of your offset account. You should also check the amount you pay in credit card fees, as they may be more than the benefits the card offers for your offset.
  • Make sure you check the conditions of your home loan. Depending on the loan type and the provider, you might only be able to have some of your offset account’s balance offset against your loan. Instead of 100% of the money in your account offsetting your home loan, maybe only 40% of the balance is taken into account. Generally, fixed rate mortgages are less likely to offer a 100% offset.
  • While offset accounts are free for some home loan packages, for others you have to pay a monthly fee. Be sure to check your home loan terms and conditions.

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Things you should know

The information contained in this publication is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this publication without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this publication.

Bankwest Easy Alerts are available for your mobile personal transaction and savings accounts. Limited alerts only are available for credit card transactions. Bankwest Easy Alerts will be sent to any compatible iOS and Android device on which you have the Bankwest App and enabled notifications. Whilst some alerts may be sent to your device once you have enabled notifications, in order to receive the full range of Easy Alerts available you will also need to activate the Bankwest Easy Alerts service within the Bankwest App. Terms of Use apply. Bankwest Easy Alerts is currently supported on iOS 9 and Android 5.0 devices and above. Bankwest Easy Alerts is not available on tablets and Windows devices.