Conflicting loan advice: Whether to include offset account

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Q. I have recently visited several mortgage brokers who have given me conflicting reports as to the best type of loan for me. I was interested in a loan with an offset account, which some brokers recommended but others did not. I really don’t know what to do.
 
My details are as follows: I am a first homebuyer with a $30,000 deposit and enough to pay for other expenses; I’m earning $39,000; and I have purchased a $114,000 property and need to borrow around $80,000.
 
I’m told that offset accounts really only work with high salaries, but how much is ‘high’? Should I consider a standard variable loan and just make additional repayments?
 
A. Given your circumstances, and the relatively low value you are borrowing relative to your salary, you should have the loan repaid within a short amount of time. This is likely to save you thousands of dollars in interest. Offset loans and lines of credits would only act as incentives to delay payment of the loan.
 
My advice would be to consider a standard variable rate loan. You can deposit additional funds into the loan and redraw them with only a few restrictions. You are correct that offset accounts are more effective when used with higher disposable incomes. Added to this, the benefits are compounded over time, and hopefully you won’t be paying off this loan for long.
 

With experts predicting rates to go down next year, standard variable rates should also decrease, which makes these loans even more attractive to borrowers such as yourself.

Related: Home Loan Calculator

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