Interest only offset accounts

Interest-Only Offset Account Home Loans Comparison

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.

Compare interest only loans with offset accounts

Rates last updated October 17th, 2018
$
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
Homeloans Flexichoice Prime Variable ProPack Home Loan - LVR up to 80% (Owner Occupier, IO)
3.99%
4.37%
$0
$345 p.a.
80%
Competitive interest only rate and a 100% offset account.
4.04%
4.36%
$0
$299 p.a.
80%
Get a fully-featured loan with a 100% offset account and discounts for higher borrowing amounts.
4.43%
4.24%
$0
$0 p.a.
90%
Interest-only loan for investment. Available with a 10% deposit and includes a partial offset account.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.61%
4.40%
$0
$349 p.a.
80%
An interest only package loan for owner occupiers. 100% offset account attached.
5.05%
4.81%
$0
$349 p.a.
80%
Interest only package loan for owner occupier borrowers. This loan comes with a 100% offset account.
5.52%
5.60%
$0
$395 p.a.
80%
Pay no application fee with 100% offset account with redraw facility and borrow up to 95% LVR.

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

Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

Get a very low interest rate and pay fewer fees. Enjoy a fast online application process and add a 100% offset account for $10 a month.

HSBC Home Value Loan - (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.

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, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy & Cookies Policy and Terms of Use, Disclaimer & 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

    • finder Customer Care
      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
Go to site