Today’s email question is from Rae in Leederville. She asks, Can a fixed rate mortgage have an offset account?
There are some banks and lenders that do offer a 100% offset account with a fixed rate mortgage. Some offer a partial fixed rate offset account, whilst most banks or lenders do not offer offset accounts with fixed rate mortgages. Lets look at the differences between the types of offset accounts that maybe on offer with banks or lenders.
A few banks and lenders offer 100% offset accounts against a fixed rate home loan. This means that 100% of the funds in the offset account will offset against the mortgage. For example, if you had $10,000 in your offset account today, and your home loan was $100,000, the $10,000 offsets against the $100,000, meaning that the interest charged on your home loan, will be on the balance (or difference), which is $90,000.
Some banks or lenders offer partial offset accounts on fixed rate mortgages. For example, a lender may offer a partial 40% offset account with a fixed rate home loan. This means that of the balance of the offset account, only 40% of the balance will offset against the home loan. If we use the example above, if you had $10,000 in your offset account, and your lender offers a partial offset of 40% of the balance, the amount offsetting your home loan will be $4,000. There is a big difference between the money you will save, if your bank or lender offered a 100% offset account against a fixed rate home loan.
Most banks or lenders however, generally do not offer offset accounts against fixed rate home loans. It is important to know what the features of your home loan are, and compare it to other options, to learn what is best for your personal financial situation.
http://www.mortgagefacts.com.au/
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