Mortgage offset accounts are an excellent way to save thousands of dollars on your home loan and reduce the term of the loan substantially. For many, this is a great way to getting yourself all juiced up and motivated to find more ways to save even more on their home loans.
One distinct way of increasing your enthusiasm for saving on your home loan is to be able to calculate the results you would reasonably expect to receive if you were using an offset account.
Even if you're already using an offset account it can be an additional advantage to project forward the type of savings that can be achieved.
The way to do this is with the use of an 'Offset Calculator', which allows you to enter personal and custom details of your home loan situation along with other pertinent additional data in order to give you meaningful results.
Additionally, you will be able to adjust the numbers in order to experiment with different financial scenarios.
It's Time to Get Up to Speed
If you're not up to speed yet on how effective a mortgage offset account can be in helping you pay your home loan off faster, let's quickly discuss some of the aspects of an offset account.
On average over the last 40-50 years interest rates have evened out at about 7.25%.
Sometimes they're higher and at other times they're lower.
But, on average over the long term of paying your house off to the bank you're going to be paying them an average of 7.25%.
Tax Free Earnings Don't Come Along Every day
So, the secret here is, interest saved is interest earned, tax free. In other words, if you pay off your home loan off faster it's a huge financial benefit to you. The faster you can do it the larger the financial benefit will be to you and your family.
Think about it for a moment, for every dollar saved it allows you to earn a tax free 7.25% on it, in real terms, depending on your current tax bracket, you're actually earning a gross amount equivalent to approximately 10-12 per cent before tax. That's assuming you were trying to invest money into some kind of interest bearing investment.
Calculate your Savings with an Offset Calculator
An offset calculator can give you a great jump start by allowing you to realise just how much savings can be made with an offset account.
Online there are any number of these calculators available, some good, some not so good. Most of them though can be used anonymously, or they could, last time I looked. Just go to Google and put in the search field 'mortgage offset calculator' (not to be confused with other types of offset calculators use in engineering projects).
Although, at this stage I should mention I haven't been able to find one recently that will actually include all of the required calculations that'll return you precise results on the maximum savings that could be made if you were following the best practice rules for maximising your offset account benefits.
The Best One Disappeared
At one stage there was a really good one available online, but for some reason it's no longer available. The functions on that one were terrific, because you were able to input your daily in and out daily cash transactions, which gave you a true picture of your real time cash flow movements, both income and expenses.
Anyway, I believe the Government in their 'save us from ourselves' mindset stepped in and told the guy to remove it. Apparently it was contravening some kind of financial law.
But don't let that deter you, if you have a focus on paying your mortgage off faster, it's still worth a look online and tinkering around with any of the offset calculators you find, as they will still give you a look into the window of what's reasonably possible.
We did find one that was a cut above the rest and it can be accessed from a link that's located towards the bottom of one of the pages on our offset account website. If you would like to access it, follow the link offset-account.com.au/offset_calculator.html link below. Also, on that page you'll find instructions on how to quickly access the calculator.