Top tips to use multiple offset accounts with your first home

When you're buying your first home as an ADF member, understanding how to structure your home loan can save you thousands in interest payments. One powerful strategy that many first home buyers overlook is using multiple offset accounts with their Home Loan.

Multiple offset accounts allow you to separate your savings for different purposes while still reducing the interest you pay on your loan amount. This approach can be particularly beneficial for ADF members who may have irregular pay cycles or specific savings goals.

How Multiple Offset Accounts Work

An offset account is a transaction account linked to your home loan. The balance in this account reduces the loan balance on which interest is calculated. Instead of earning interest on your savings, you save money by paying less interest on your mortgage.

With multiple offset accounts, you can have several accounts linked to the same home loan. Each account balance contributes to reducing the interest charged on your loan amount.

Benefits for First Home Buyers

Using multiple offset accounts provides several advantages when buying your first home:

• Organised savings: Keep funds for different purposes separate (emergency fund, holiday savings, vehicle expenses)
• Maintained liquidity: Access your money whenever needed without restrictions
• Tax efficiency: No tax payable on interest saved, unlike earning interest on regular savings accounts
• Flexibility: Adjust your savings strategy as your financial situation changes

Structuring Your Offset Accounts

Consider setting up offset accounts for different purposes:

1. Emergency fund account: Maintain 3-6 months of expenses for unexpected costs
2. Bills and expenses account: Keep funds for quarterly bills like insurance and rates
3. Goals-based account: Save for specific purchases or experiences
4. Investment account: Build funds for your first investment property

Each account reduces your loan balance for interest calculation purposes while keeping your savings organised and accessible.

Considerations for ADF Members

ADF members have unique advantages when applying for a home loan, including access to LMI waivers and low deposit loans. When combined with multiple offset accounts, these benefits become even more powerful.

Your borrowing capacity may accommodate loans with offset facilities, and many lenders offer packages specifically designed for defence personnel. These packages often include multiple offset accounts at no additional cost.

Choosing the Right Loan Structure

When selecting a home loan with multiple offset accounts, consider:

• Variable vs fixed interest rate: Offset accounts typically only work with variable rate portions
• Account fees: Some lenders charge monthly fees per offset account
• Minimum balances: Check if accounts require minimum balances to function effectively
• Access methods: Ensure you can easily transfer funds between accounts

Many lenders across Australia offer different offset account configurations, and having access to Home Loan options from banks and lenders across Australia means you can find the right structure for your needs.

Getting Started

Before you apply for a home loan with multiple offset accounts, gather your bank statements and assess your financial situation. Consider how much you typically save each month and how you'd like to allocate these funds across different offset accounts.

If you're eligible for the Home Guarantee Scheme or 5% Deposit Scheme, multiple offset accounts can help you build savings faster while paying less interest.

The application process involves providing evidence of your savings capacity and demonstrating how you'll use the offset accounts effectively. Your mortgage broker can help structure the loan to maximise the benefits of multiple offset accounts while ensuring you meet all lending requirements.

Making It Work for You

Successful use of multiple offset accounts requires discipline and planning. Set up automatic transfers to ensure consistent contributions to each account, and review your strategy regularly as your circumstances change.

Remember that every dollar in your offset accounts reduces the interest you pay on your home loan. This means your money works harder for you compared to traditional savings accounts, especially given current interest rate environments.

For ADF members buying your first home, multiple offset accounts represent a sophisticated yet practical approach to managing your mortgage. Combined with the various first time home buyer programs and first time home buyer schemes available, this strategy can significantly accelerate your journey to home ownership.

Call one of our team or book an appointment at a time that works for you to discuss how multiple offset accounts could work with your first Home Loan.