If you are curious about the ways you can use your savings to cut the amount of interest you pay on your home loan, you may wish to speak to a financial adviser about whether offset or redraw facilities might be useful options for you to consider.
The Sydney Morning Herald’s Annette Sampson points out that while both can be excellent ways to reduce the size of your home loan, it is important to be aware of a few important differences.
Offset accounts are separate, but linked to your home loan account. Any interest you earn on the balance of your offset account is then credited against your home loan – keeping your savings separate.
Meanwhile, redraw lets you make a deposit directly into your home loan account. If you need to withdraw these funds later, your loan balance will revert to the amount it would have been before the additional ‘repayment’.
“Both have exactly the same effect in helping to save money on your home loan, they just do it differently,” Sampson explained.
Another way to potentially save money on your home loan is to speak to your mortgage broker about remortgaging or switching to a different provider or product.
Home loan rates can change frequently, so it may be worth investigating whether you can get a better deal.