Interest only offset accounts

Interest-Only Offset Account Home Loans Comparison

Rates and fees last updated on

Save even more on an interest-only home loan with an offset account

An interest-only offset home loan means you can reduce your loan repayments considerably because you are only paying off the interest component of your loan while at the same time your offset savings account is working for you to even further reduces the amount of interest payable.

It is a popular option for investors as it helps to keep your monthly repayment costs to a minimum but it is also handy for home buyers who need to free up their cash flow during the construction of a new home. It remains important to not forget that while you are not paying anything off the principal amount of the home loan your actual loan amount itself will not reduce.

Rates last updated November 22nd, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.79%
5.26%
$600
$0 p.a.
95%
Short term fixed rate home loan with no ongoing fees with an interest only repayment option.
3.69%
5.10%
$600
$0 p.a.
95%
Grab a 2 year fixed rate with 100% offset and no ongoing fees.
4.30%
4.68%
$0
$375 p.a.
80%
Package your home loan with other Suncorp banking products and receive discounts on them all.
4.36%
4.72%
$0
$350 p.a.
90%
An linked offset account to help to payoff your home loan sooner.
5.43%
5.58%
$600
$120 p.a.
95%
4.33%
4.27%
$0
$349 p.a.
90%
4.69%
6.08%
$0
$395 p.a.
95%
4.47%
4.39%
$0
$349 p.a.
90%

Compare up to 4 providers

How the offset component works with interest-only home loans

An offset savings account is the same as any other savings account you may have , be it with a bank, credit union, building society, or any other financial institution. You have the same freedom to deposit funds into the account at any time as well as withdraw funds from the account whenever you wish to do so:

  • The only difference is that an offset savings account is a transaction account linked to your mortgage.
  • The balance in your offset savings account is offset against the amount owing on your home loan.
  • For instance if you owed $322,000 on your mortgage and the same time you had a $2,000 balance in your linked offset savings account you would only be required to pay interest on an amount of $320,000.

As long as any funds remain in your offset savings account it will reduce the amount of interest you have to repay on your home loan.

How interest-only payments work

When you take out an interest-only home loan, or investment loan, you are only required to pay back the accrued interest on your loan. Normally you would be paying the interest as well a portion off the principal (the amount you actually borrowed). With an interest-only home loan you leave the actual money you borrowed unpaid:

  • The lender who loaned you the money is happy with this arrangement as the value of the property is his security.
  • If you have invested right however the property will continue to increase in value during this time and with it the equity you hold on the property.
  • At the end of the interest free period you will be expected to start making repayments off the principal, or if it coincides with the end of the loan, you will have to pay out the entire amount remaining.
  • Investors like this as the sale of the property at its increased valuation will give them their profit. Especially for those who have carried our renovations.

About Comparisons of Interest-only Home Loans

What is an interest-only offset account

To understand how these products can save you money you must first know what the loan and the feature is. This section of the article will explain what an interest-only loan and an offset account is:

  • Interest-only loan. An interest-only loan is a loan that is offered by many providers. Most loans will require you to pay both the interest and the principal with each repayment, however the interest-only loan only requires you to pay the interest portion of the repayments. When the interest-only period is over you can then either switch to another loan or pay off the loan in full.
  • Offset account. An offset account is a feature that comes with many loans such as the interest-only loan. This feature allows you to reduce the amount of interest on your repayments. The offset account allows you to deposit your savings into the account. These savings are then offset against the total amount owing on the loan when interest in charged. While you will still have access to this money you will be able to reduce the amount of interest that is charged to your account.

How can the interest-only offset account save you money

By using the interest-only loan and the offset account together you will be able to save money. You will be able to do this by:

  • Lowering the interest. The interest-only loans main feature is that you will only have to pay the interest. By depositing savings into the offset account you will reduce the amount of interest that is charged to your account. This will directly reduce your repayments as you will be able to reduce the only payment that you are required to make.

What are interest-only offset accounts used for

The interest-only loans are generally suited to investors. The interest-only accounts allow people time to clear up other investments so that they can pay the principal at the end of the interest-only period. Furthermore, they will give investors a low payment loan option if they are renovating a house so they can sell the house for profit in the future.

Interest-only loans are a great way for people who are looking to invest to buy a property. They will only require you to pay a small amount so that you can free up money for renovations or other investments. By using the offset account with the interest-only loan you will be able to use your savings to reduce the amount of interest that you will pay onto the loan. As the interest is the only amount that is required to be repaid this will reduce your repayments by a lot.

Was this content helpful to you? No  Yes

Related Posts

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)

A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

IMB Budget Home Loan - LVR <=90% (Owner Occupier, P&I)

Get a competitive rate without features you may not use.

HSBC Home Value Loan - Resident Owner Occupier only, P&I

Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.

2 Responses

  1. Default Gravatar
    IanAugust 7, 2015

    Are you able to establish a loan P&I for 90,000. I have $80,000 can you offset that $80,000 and how much would the repayments be?
    Thanks Ian

    • Staff
      BelindaAugust 10, 2015Staff

      Hi Ian,

      Thanks for your enquiry.

      finder.com.au is an online comparison service, so we don’t offer home loans ourselves but rather compare different home loans to help you make a more informed decision.

      Above on this page you can compare a range of interest-only offset home loans and if you’d like to apply you can click the ‘go to site’ button to be redirected to the lender’s application page.

      If you’d like to estimate your mortgage repayments you can use our home loan repayment calculator on this page.

      Thanks,
      Belinda

Ask a question