Offset accounts and redraw facilities
MANAGE your debt better by depositing regular salary and spare cash into a mortgage offset account or directly into a housing loan account which has a redraw facility.
The deposit will reduce the housing loan balance and interest payable.
The deposit can be withdrawn at any time.
It is advisable to consider using mortgage offset accounts and housing loans which have redraw facilities to deposit moneys which are ultimately intended to be used for another purpose.
Regular salaries can also be deposited into these accounts until the money is required for personal or other purposes.
A mortgage offset account is a bank account linked to a housing loan.
The account does not pay interest on any deposits placed in it.
Money in the account will notionally reduce the loan balance of the housing loan and reduce the interest expense for the period that the money is in the account.
A redraw facility allows a client to repay some or all of the housing loan.
The client can reborrow the money that has been repaid and return the loan back to the agreed, maximum amount.
Why use this strategy?
Well, these accounts allow you to use all of your money to temporarily reduce the value of a housing loan, reducing the interest payable on the loan.
As the interest expense on a housing loan is not tax deductible, the reduction of this interest expense is a most tax effective use of these monies.