Mary and Steve accessed their overpayments to budget for a baby
Mary and Steve have a home loan balance of $340,000 and have built up a considerable amount of $7,500 in their connected offset savings account. They have been over paying their loan for a few years now and are expecting their first baby in a few months.
Whilst preparing for the arrival of the newborn by fitting out the spare room, they have had the option of spending on their credit card or using their offset account Visa Debit card. They opt to use the debit card and withdrawn from their offset account.
This way they can reduce the amount of interest paid, i.e. 20.24% p.a. on their credit card as opposed to 5.72% p.a. on their home loan balance. Once the room has been fitted, they have spent $3,500, leaving $4,000 left in the offset account.
This now means they are only paying interest on their new loan amount of $336,000.
