Buying your first home is an exciting milestone, especially for ACT Government employees who have access to stable employment and potential benefits that can help in the property market. One feature that often gets overlooked when applying for a home loan is the offset account – a powerful tool that can significantly reduce your interest payments over the life of your loan.
What is an Offset Account?
An offset account is a transaction account linked to your home loan. The balance in this account is "offset" against your loan amount, meaning you only pay interest on the difference. For example, if you have a $500,000 loan amount and $50,000 in your offset account, you'll only pay interest on $450,000.
This arrangement can save you thousands of dollars in interest payments while maintaining full access to your funds – unlike making additional repayments directly onto your loan principal.
Benefits for First Time Home Buyers
For ACT Government employees buying their first home, offset accounts offer several advantages:
• Flexibility with your finances: You can access your money whenever needed without penalties
• Interest savings: Every dollar in the offset reduces your interest charges
• No additional fees: Many lenders offer offset accounts without monthly account keeping fees
• Tax benefits: Unlike term deposits, you don't pay tax on "earnings" from offset accounts as you're technically just reducing debt
When Should You Consider an Offset Account?
Not every first time home buyer will benefit from an offset account. Consider this option if you:
- Have substantial savings: If you'll maintain a significant balance (typically $10,000+), the interest savings can outweigh any account fees
- Receive regular bonuses: ACT Government employees often receive performance bonuses that can sit in the offset account
- Plan for future expenses: Saving for renovations, holidays, or your next property investment
- Want flexibility: Unlike fixed deposits, you can access offset funds anytime
Ready to get started?
Book a chat with a Finance and Mortgage Brokers at Public Home Loans today.
Understanding Interest Rate Impact
The effectiveness of your offset account depends on your interest rate. Whether you choose a variable interest rate or fixed interest rate, the offset calculation remains the same. However, with variable rates, your savings will fluctuate with rate changes, while fixed rates provide predictable offset benefits.
Many lenders offer interest rate discounts for packages that include offset accounts, which can enhance your overall savings strategy.
Maximising Your Offset Account Strategy
To get the most from your offset account:
• Direct your salary: Have your entire salary deposited into the offset account
• Use credit cards wisely: Pay bills with a credit card (paid in full monthly) to keep more money in offset longer
• Combine with other benefits: Utilise first home owner grants (FHOG) and first time home buyer schemes to boost your offset balance
• Regular reviews: Monitor your financial situation and adjust your strategy as needed
Getting Started with Your Application Process
When you're ready to apply for a home loan, having your offset account strategy planned can strengthen your application. Lenders will review your bank statements and borrowing capacity, so demonstrating good savings habits through an offset account shows financial discipline.
Public Home Loans can help you access Home Loan options from banks and lenders across Australia, ensuring you find packages that suit your needs as an ACT Government employee. We understand the unique benefits available to public servants and can guide you through first time home buyer programs and the Home Guarantee Scheme.
Making the Right Choice
Before committing to an offset account, consider your loan to value ratio (LVR) and whether you'll need lenders mortgage insurance (LMI). Sometimes, using your savings to reduce your loan amount and avoid LMI might be more cost-effective than keeping funds in an offset account.
Our streamlined application process helps you weigh these options and understand how different scenarios affect your overall costs, including stamp duty implications and available investment loan options for future property purchases.
Every first Home Loan journey is unique. Having access to banks and lenders nationwide means we can find solutions tailored to your circumstances, whether you're looking at your first investment property or simply want to get pre-approved for your family home.
Call one of our team or book an appointment at a time that works for you to discuss how an offset account could fit into your home buying strategy.
