home loan offer a low ongoing interest rate and often reduce fees (including application fee) at the expense flexibility and convenience.
Basic loans offer minimal features and wouldn’t usually include an offset account, ATM cards or cheque book.
An offset account is a regular bank account with ATM, cheque book and internet access connected with your loan. Rather than earning interest on the funds in your offset account, you save interest on your loan (mortgage). The interest rate you receive on a savings account is traditionally lower than what you are being charged on your mortgage, so it makes sense to offset additional funds in your offset account against your loan. When you have an offset account linked with your mortgage, the bank will charge interest on the balance of your outstanding home loan, less the funds in your offset account, reducing the interest you pay which helps you pay off your loan sooner. For example, an offset account with a $20,000 deposit offset against a loan of $400,000 would require mortgage repayments on $380,000, saving the borrower interest payments on $20,000.