You already have an 100% offset account as part of your loan, and you know it’s correctly linked against your owner occupied home loan.*
With each monthly statement, you can see you’re saving interest but you’d like to see if you can push those savings higher.
Here’s a few things you can try:
Ensure all household income is paid into your offset account
You should already have all wages, tax returns, investment income and windfalls (if you’re lucky!) paid into your offset account. Since every dollar sitting in this offset account is working to reduce your interest costs, it makes sense to have all income – and all your savings – contained in your offset accounts.
Consolidate savings accounts
Having money sitting in non-offset savings accounts is potentially costing you additional interest. Especially if you’re also paying account keeping fees on these accounts.
The benefit of an offset account is that it SAVES you interest typically at a higher rate than what you could earn if these funds were sitting in a traditional savings account. Therefore, to maximise the interest saving benefits of an offset account, you want this account to hold all your cash, so that every last dollar you have is actively working to reduce the interest costs you incur on your home loan.
Check options with your lender
Some clients like to have separate accounts for different purposes. For example, you might have one account that you’re using to save for a big holiday or perhaps you have separate accounts set up for each of your kids. Whilst this can be a good way to help you manage money, it could be costing you more interest as a result.
The good news is that some lenders will allow you to have multiple offset accounts. This way, you can still spread your cash across different accounts, but they’re all working to offset the interest charges. (If you’re not sure if your lender allows multiple offset accounts, just check.)
Keep money in your account for as long as possible
Interest is calculated on a daily basis, but typically paid monthly. So, an easy way to maximise interest savings is to keep as much cash in your offset account for as long as possible. But it’s not so easy to always keep money in your account…. what happens when you need to pay a bill?
To keep cash in their account for as long as possible, some clients like to use a credit card to cover all expenses incurred over the course of a month. Then, when the credit card bill is due, they simply pay the bill in full from their offset account.
Whilst you’re still covering all your expenses, a credit card gives you a little longer to actually hand over the cash. And whilst this cash is sitting in your offset account, it’s working to help to reduce the interest incurred on your loan. Because each day the cash stays in the offset account, the less interest you will be charged.
This strategy can be an easy way to squeeze a little more benefit out of your offset account each month. But it only works if you pay your credit card bill in full when it’s due.
* If you set up your loan directly with a lender originally, it’s worth checking to ensure your offset account is properly linked to the correct home loan. You may be surprised at how often we meet new clients whose offset accounts were never set up correctly when their loan was initially established.