With wages plateauing, it can be hard to find the extra cash to pay off your home loan faster!
With interest rates at record low levels, it is important to explore ways to pay off your home loan faster.
The above example uses a structure of a main offset account and sub accounts offered by some Banks. In this example, the total credit funds in the offset “pool” is $23,000.
If the couple had a loan of say $500,000, then after the offset they would pay interest on only $477,000.
As a percentage of Home Loan balance, the offset may not seem great, over time the savings can be substantial!
A Mortgage Offset Account makes financial sense!
Using an Offset Account will provide a better return than say placing the monies in a savings account or term deposit. The reason being, the Home Loan interest rate, will always be higher than what Banks pay for monies held on deposit.
The savings you enjoy using an Offset Account are also tax free, whereas interest earned is taxable income!
How to increase the Mortgage Offset!
Pay off your Home Loan faster by making extra payments!
Another way you can save on interest and pay off your Home Loan faster is to make extra payments . (You can only do this for variable rate not fixed rate loans)
An extra $50 per week can deliver significant interest rate savings over the term of the loan!
For example, on a loan of $500,000 at 3.80%, paying an extra $50 per week, shortens the loan term from 30 years t0 22 years and 6 months – delivering a saving of $94,189!!!
For most people, a Home Loan will be one of the largest financial commitments they undertake – the faster you can repay the borrowing the more interest you will save.
Using a Mortgage Offset Account is a simple and practical way you can save money and pay off your Home Loan faster.
If you are financially disciplined, by using your Credit Card for living expenses and bills during the month and then paying it off before the interest free period expires, you can amplify the savings.
If you would like to learn more about how you could pay off your Home Loan faster don’t hesitate to give me a call on 0421 304 990