Paying off your mortgage faster is a goal for many homeowners, and combining a credit card with an offset account can be a smart way to achieve this. Here’s how these two tools can work together to save you money and reduce your mortgage term.

What Is an Offset Account?

An offset account is a bank account linked to your home loan. The balance in this account offsets your mortgage balance, so you pay interest only on the difference. For example, if your mortgage is $400,000 and you have $50,000 in your offset account, you’ll only pay interest on $350,000. This reduces the amount of interest you pay over time, helping you pay off your loan faster.

How Does a Credit Card Fit In?

Using a credit card for your everyday expenses allows you to keep more money in your offset account for longer. Here’s the basic strategy:

1. Deposit Your Income into the Offset Account: As soon as you get paid, deposit your income into the offset account. The more money in the account, the less interest you pay on your mortgage.
2. Use Your Credit Card for Daily Purchases: Pay for groceries, bills, and other expenses with your credit card, keeping your cash in the offset account.
3. Pay Off the Credit Card in Full: Ensure you pay off your credit card balance in full each month to avoid interest charges. This way, you maximise your interest savings on your mortgage.

Benefits and Considerations

• Interest Savings: More money in your offset account means less interest on your mortgage, potentially saving you thousands.
• Faster Mortgage Repayment: With less interest, more of your payments go toward the principal, shortening your loan term.
• Discipline Required: To make this work, you must pay off your credit card in full each month and avoid unnecessary fees.

Is This Strategy Right for You?

If you’re disciplined with your spending and can manage your finances well, this strategy can be highly effective. However, if you’re unsure, a mortgage broker can help you decide if it’s the right approach for you.

By using a credit card and offset account wisely, you can pay off your mortgage faster.

If you have any questions or need personalised advice, get in touch. We're here to help you make the most of your mortgage and move closer to owning your home outright.