In Your Interest

Offset Accounts - The ninth wonder of the world

Recently I was with a client who I did a loan for 19 years ago. He was single, on an average income, but he was now mortgage free. He didn’t have to live a life of extreme frugality. He took holidays and had nice cars. How did he do it; how did he pay his loan off in 19 years instead of 30? He used an offset account. Offset Accounts have been around for a long time now but their ability to reduce your mortgage is still not well understood. Einstein said compound interest was "the eighth wonder of the world" so Offset Accounts must be the Ninth. Having an offset account attached to your home loan is a virtual must for anyone who can save a little above their mortgage and other monthly costs.

Cut your home loan by 9 years

Does your income provide you with some spare capacity to pay off your mortgage and you’re wondering whether it makes a difference whether you just pay off the principal or use an offset account or redraw facility? Well, according to studies by Canstar (AFR, 21 Jan 2019) it makes no difference how you do it but paying an extra $125 a week into a mortgage of $500,000 could knock almost nine years from the loan term and save you more than $110,000! Consider a borrower paying an extra $125 a week on a $500,000, 30-year principal-and-interest loan into either a redraw facility or offset account. Using either option with the same terms and conditions will repay a loan in equal time and save the sa

Credit cards can cost you your loan

In general terms, there are two types of people that use credit cards: the Transactors and the Revolvers. The Transactors use their card to buy everything and then pay the card balance in full at the end of each and every month. If they're smart, a Transactor rarely pays anything for using their card. Revolvers rarely manage to pay of their debt in full and roll their debt over into the next month, like a revolving line of credit. As a result, they pay interest each month. Credit card interest rates are very high in comparison to other sources of debt so banks make a lot of margin from people who carry debt from month to month. With the exception of maybe an annual fee, all those reward poin



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Etairos Finance Pty Ltd

ACN 159 947 323

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Etairos Finance Pty Ltd

ACN 159 947 323

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authorised under Australian Credit Licence 389328

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