Maybe you’ve heard about offset sub-accounts but aren’t quite sure how they work. Here we explain everything you need to know:
An offset sub-account or feature may help you reduce the interest you pay on your home loan by using the money in your offset sub-account to offset the balance of your home loan.
What is an offset sub-account?
An offset sub-account is an account or feature that is linked to your home loan and may help you reduce the amount of interest you pay. Any money you have in this linked account can be used to offset the balance of your loan, which then reduces the amount of interest you are charged that month.
For example, if you have a home loan balance of $200,000 and $2000 is paid into your offset account and not withdrawn, you will be charged interest only on the balance of $198,000. Your minimum monthly instalments will however remain the same, which means you not only save on interest payments, but may even pay off your home loan quicker. A 100% Interest offset sub-account can be added to any of Pepper Money’s variable rate home loans.
Some lenders also facilitate repayment offset where the offset balance reduces the monthly minimum instalment (MMI) amount. Pepper Money’s home loan products do not offer this, so the scheduled MMI will not change, and is calculated on the full loan account balance.
How does an offset sub-account work to pay off my loan?
You can have one offset sub-account per home loan, so many people use it like their everyday account. You can have your salary paid directly into the account so that every dollar you have is used to reduce the cost of your home loan daily. If you have a large lump sum, you can also put this in your offset sub-account as long as it’s not greater than the balance owing on your home loan.
As your offset sub-account and home loan are linked, if you don’t pay the minimum monthly instalment on your home loan, any money in your offset sub-account may be automatically used to make that payment. This would usually be processed within 14 days after the payment was due, however this timeframe may vary between lenders so make sure to check terms and conditions with your home loan provider. If your offset sub-account becomes overdrawn, your lender may also use funds from your other loan account(s) with available funds to clear the debit balance.
Are there any fees?
There are no fees or charges to access a 100% offset sub-account with Pepper Money, including no monthly fees for any offset sub-account splits. You can even get a Visa Debit card with your offset sub-account – that's just another way you can access your available funds or redraw from your home loan.
Using your Visa Debit card, you can withdraw up to $1,020 in cash per card and charge up to $5,000 per day, as long as you have the money in your offset sub-account. Any charges are per account (shared by all card holders) and includes the daily cash limits. You can even use your Visa Debit card to buy things using Visa payWave®.
While we don’t charge a fee for issuing your Visa Debit card, there may be other fees or charges, such as if you lose your card, use it overseas or withdraw money from an ATM. These are all set out in your loan agreement and Conditions of Use for the Visa debit card.
Pepper’s 100% offset sub-account and Visa Debit card are two features that give you more flexibility with your variable rate home loan and may even help you pay off your loan faster.
For more information download the Pepper Money Fact Sheet, or contact one of our friendly Lending Specialists on 13 73 77.
If you are an existing Pepper Money customer and would like to find out about the 100% offset sub-account feature or if you have any other questions around your home loan, please contact customer service on 1300 650 931.