Pairing fixed rates and offset accounts

Can you link an offset account to a fixed loan?

With Tic:Toc, you can.

Read our guide to find out how and why a fixed rate loan with an added offset account could be the budgeting powerhouse of your dreams.

Fixed rates

A fixed rate home loan is where the interest rate is locked in (‘fixed’) for a set period of time, usually between 1-5 years.

Great for those who want stable repayments

This means your repayments will be the same, giving you more certainty and stability in your budgeting, which is one of the upsides of going fixed. In a rate hike environment, having a fixed rate means you don’t need to worry about your repayments changing.

The downsides to fixed rates include:

• If interest rates start to decrease you don’t receive the benefits of those movements

• The break cost if you need to end your fixed rate period earlier than expected (they’re very expensive)

• Most lenders limit the amount of additional repayments you can make. And there is usually an annual cap so you don’t benefit as much for paying down more of your principal loan amount. These additional, voluntary amounts are usually accessible through a redraw facility

• Typically not available with offset accounts – but keep reading.

The Tic:Toc difference

With Tic:Toc, you can combine the certainty of a fixed rate with the saving power of an offset account. That’s right. Fixed rate home loan + offset account = Getting the best of both worlds with Tic:Toc.

How? Let's break it down.

What is an offset account?

An offset account is a transaction or savings account that is linked to your home loan. Just like other savings accounts, you can choose to have your salary deposited into it and set up direct debits. You can also have a debit card connected to it for everyday purchases. However, where it differs from other transaction/savings accounts is how it is connected to your home loan.

At the end of each day, the balance of your offset account is taken away from the amount you owe on your home loan, and the interest for your home loan is then calculated on the difference between them (i.e. on your loan amount, minus the savings you have in your offset account).

This means if you have money stashed in your offset account, you will pay less interest over the life of the loan and can pay back your home loan faster. This is a handy way to reduce the amount that your home loan interest is calculated on without having to make extra repayments and needing to redraw them later. Offset accounts are different to redraw facilities because they are a separate account from your home loan, while a redraw facility allows you to withdraw any additional repayments you have made into you home loan.

Full or partial offset – what's the difference?

Depending on your lender, you can get access to a partial or a full (100%) offset account. A full (100%) offset account means that the full amount in your offset account is deducted from your principal amount, whilst a partial offset means only a proportion of the amount in your account is offset against your loan balance.

With Tic:Toc, you can access a 100% offset account for only $10 a month. Want to deep dive into offset accounts? You can do that here.

Find out more about Tic:Toc’s fixed rate home loans, which all have the option to add an offset account.