Q: We are looking at a new loan and want to know what the difference is between redraw and offset account. Does interest rate change if we did have the offset?
A: Hi Drew, thank you for your question.
Offset accounts and redraw facilities are home loan features that allows you to use extra savings to reduce the balance of your loan and thefore reducing your interest repayments on the home loan.
An offset account is a savings or transaction account that is attached with your mortgage account. The savings or money that you have "parked" or deposited in the offset account will work against the interest you're paying on your loan. So for example, if you have a loan worth $500,000, and have $20,000 in your offset account, you will only pay interest on the difference which is $480,000 instead of the full loan amount.
In contrast, a redraw facility enables you to deposit any savings/money you may have directly into your home loan account. You can then redraw from the loan any funds that are in excess of your regular repayments.
Offset accounts are generally more expensive than your basic homeloan. The interest rate is usually higher too and there are also bank fees and charges that is associated with an an offset account.
I hope this helps! If you need to discuss further, please contact me and I will be more than happy to assist.
Regards, Melissa Huynh Finance Broker 0428 204 143 Melissa.firstname.lastname@example.org
Q: We have recently taken out a mortgage but have had to go with a loan that has a higher than average interest rate because of a small issue on my husbands credit file. Assuming we make payments early, how long until we can refinance at a lower rate?
A: Hi Michelle, thank you for your post.
In Order to refinance your current loan to another lender for lower rate of interest, it will depend on factors such as (again) your husbands credit file and your repayments conduct on your current Home loan. If for example, in 6-12 months down the track, your husbands credit file has "cleared " which means the "small issue" no longer appears on his credit report and your repayments history on the home loan has been up to date with no missed payments or late payments, then we can look into a refinance within 6 months time. I hope this helps! If you need to discuss further Michelle, please contact me and I will be more than happy to assist further.
0428 204 143