One of the most common questions I get asked by clients is whether they can get an offset account with a fixed rate. The short answer is YES, but it’s not always straightforward. In this article, I’ll explain what an offset account is, how it works with a fixed-rate mortgage, and the benefits of using an offset account to manage your mortgage.
What is an offset account?
Firstly, let’s define what an offset account is. An offset account is a savings account linked to your mortgage. The balance of your savings account is offset against the balance of your mortgage when calculating the interest payable on your loan. For example, if you have a mortgage of $500,000 and an offset account balance of $50,000, you will only pay interest on $450,000. This can significantly reduce the amount of interest you pay over the life of your mortgage and help you pay off your loan faster.
Now, let’s look at how an offset account works with a fixed-rate mortgage. With a fixed-rate mortgage, the interest rate is set for a fixed period of time, typically between one and five years. During this period, your repayments are fixed, and you know exactly how much you will need to pay each month. This provides certainty and stability, which can be particularly useful for budgeting purposes.
However, fixed-rate mortgages generally do not offer the flexibility of variable-rate mortgages, which typically allow you to make extra repayments or redraw funds from your loan. This is where an offset account can be particularly useful. By linking an offset account to your fixed-rate mortgage, you can still benefit from the interest savings of an offset account without the risk of fluctuating interest rates.
When you have an offset account with a fixed-rate mortgage, the interest rate on your loan remains fixed, but the balance of your offset account fluctuates. Any funds you deposit into your offset account are offset against your mortgage balance, reducing the amount of interest you pay. However, unlike a variable-rate mortgage, you cannot withdraw these funds without penalty during the fixed-rate period. This means that your offset account essentially acts as a savings account, allowing you to reduce the interest payable on your mortgage while still having access to your funds.
What are the benefits of an offset account with a fixed rate mortgage?
There are several benefits to using an offset account with a fixed-rate mortgage. Firstly, an offset account can help you pay off your mortgage faster. By reducing the amount of interest payable on your loan, you can reduce the time it takes to pay off your mortgage and save thousands of dollars in interest payments.
Secondly, an offset account can provide you with greater flexibility and control over your finances. With an offset account, you can still access your savings if you need to, but you can also use these funds to reduce the interest payable on your mortgage. This can be particularly useful if you have unexpected expenses or if you want to save for a specific goal, such as a holiday or home renovation.
Finally, an offset account with a fixed-rate mortgage can provide you with peace of mind. With a fixed-rate mortgage, you know exactly how much you will need to repay each month, which can be particularly useful if you are on a tight budget or if you are planning for retirement. By using an offset account, you can still benefit from the interest savings of a variable-rate mortgage without the risk of fluctuating interest rates.
Getting an offset account with a fixed-rate mortgage is possible and can be a great way to manage your mortgage repayments. By linking an offset account to your fixed-rate mortgage, you can still benefit from the interest savings of an offset account without the risk of fluctuating interest rates. This can help you pay off your mortgage faster, provide you with greater flexibility and control over your finances, and provide you with peace of mind. If you’re interested insetting up an offset account with a fixed-rate mortgage, it’s important to speak with a qualified mortgage broker who can provide you with advice and guidance tailored to your specific needs and financial situation.
I specialise in helping clients navigate the complex world of mortgages and find the best solutions to meet their needs. With access to a wide range of lenders and products, I can help you compare rates, terms, and features to find the right mortgage for you.
In addition to helping you set up an offset account with a fixed-rate mortgage, I can also provide you with expert advice on a range of mortgage-related topics, including refinancing, debt consolidation, investment properties, and more. With my help, you can make informed decisions about your mortgage and achieve your financial goals.
If you’re ready to take control of your mortgage and start saving money, contact me today to schedule a consultation. Together, we can explore your options and find the right mortgage solution to meet your needs.