Attention Mortgage Holders! Your Offset Account Needs a Check-Up
- Property Planning Australia
- 2 hours ago
- 3 min read
Banks have some explaining to do.
ASIC just dug through 204,000 home loans across eight major banks and uncovered a mess of offset account slip-ups.
Offset accounts not linked.
Linked to the wrong loan.
Linked weeks late.
All while your repayments look completely normal on the surface.
Banks have already paid out more than $55 million in compensation for offset account failures over the past two years and more payouts are expected.
For years we've been telling clients to keep an eye out for bank errors and double-check their offset account at settlement.
When something's picked up, we're on the phone with the lender sorting it straight away.
We've chased down offset issues on our clients' behalf many times over the years and obtained refunds in the thousands of dollars!
So, here's your homework to ensure your offset account is linked
1. Check every offset account you hold is linked (and to the correct loan)
Depending on your lender, you can do this:
Via your banking app or internet banking: click on your loan and check whether there's a "loan details" option to click on showing which accounts are linked to the loan as offsets.
Via your statements: check whether your offset balance is shown to be reducing the interest charged. Some lenders spell this out clearly, showing the exact offset benefit each month, for example "offset interest saved $250"
By contacting your financial institution: ask them to confirm which offset accounts are linked to which loan and request the amount interest has been reduced by each month.
2. Check your interest repayments
Doing the maths to determine if your interest charged is accurate.
Your interest should be calculated on your loan balance minus your offset balance, not the full loan balance.
Rough formula for monthly interest: interest rate x (loan balance minus offset balance) / 365 days x number of days in the month (eg: 30 or 31) = $ your approximate monthly interest.
For example, if your loan is $500,000, your offset has $50,000 in it and your rate is 6%, you'd expect roughly 6% x $450,000 / 365 x 30 days = $2,220 in interest that month.
Keep in mind interest is usually calculated daily and offset balances can move around daily as well, so this will only give you a rough approximation rather than an exact match to your statement.
To get it 100% accurate, you would need to do a daily calculation and add up the total daily calculations for the monthly amount.
Some will get into the detail, others will stick with the rough guide.
If you smell a rat or the number you land on is wildly different to what your bank is charging, that's worth chasing up.
Need a hand?
If you would like to confirm any of the above steps or have any questions, reach out to us.
Our support, service and advice is ongoing and continues throughout your home loan journey.
And if it's been more than two years since your last home loan health check, get in touch with us.
We'll review your rate and mortgage strategy for you and make sure everything, including your offset, is working as hard as it should be.
Disclaimer - General information only. This blog is based on Budget announcements as currently released and is not financial, tax or legal advice. Final legislation may differ from the proposals outlined here. Please seek licensed credit and tax advice before acting on any of the information in this article.
