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What is an Offset Account?

An offset account is a type of bank account that is linked to a home loan or mortgage. The balance in the offset account is used to offset the balance of the home loan, reducing the amount of interest that is charged on the loan.

For example, if you have a home loan balance of $300,000 and an offset account balance of $50,000, the interest on your home loan will be calculated as if you only owed $250,000. This can result in significant savings on your mortgage repayments over the life of the loan.

Offset accounts are usually set up as transaction accounts, which means you can access the funds in the account to make purchases and withdraw cash as needed. However, the funds in the offset account do not earn interest themselves, as they are being used to offset the interest on the home loan.

Offset accounts are a popular option for mortgage holders in Australia, as they can help to reduce the overall cost of a home loan and make it more affordable. However, it’s important to carefully consider the fees and charges associated with an offset account, as well as the terms and conditions of the home loan, before making a decision.

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