How to Minimise Your Mortgage with a 55-Day Interest-Free Credit Card and an Oļ¬set Home Loan
Are you looking to pay oļ¬ your mortgage faster and save thousands in interest? Leveraging a 55-day interest-free credit card in conjunction with an oļ¬set home loan could be the key to supercharging your mortgage repayments. However, this strategy requires a high degree of ļ¬nancial discipline and organisation to execute successfully.
The Power of Oļ¬set Accounts
An oļ¬set account is a transaction account linked to your home loan that allows you to reduce the interest you pay. The balance in your oļ¬set account is deducted from your loan amount when interest is calculated, so you only pay interest on the diļ¬erence.
For example, if you have a $450,000 mortgage at 6% interest and $40,000 in your oļ¬set account, you’ll only be charged interest on $410,000. Let’s say you have a 30-year mortgage at a 6% interest rate. Without an oļ¬set account, your monthly interest would be $2,250. But with $40,000 in an oļ¬set account, your interest drops to $2,050 per month, saving you $200 each month or $2,400 annually. Over the life of the loan, this could add up to over $72,000 in interest savings.
The Credit Card Trick
To maximise the beneļ¬ts of your oļ¬set account, you can use a credit card with a lengthy interest-free period, typically 55 days. Here’s how it works:
Have your entire income deposited into your oļ¬set account each month.
Use your credit card to pay for all living expenses, bills, and purchases during the month.
Pay oļ¬ the credit card balance in full before the interest-free period expires, using the funds from your oļ¬set account.
This allows you to keep your money in the oļ¬set account for as long as possible, reducing the interest charged on your mortgage. It’s essentially using the bank’s money for free to pay down your debt faster.
However, it’s crucial to pay oļ¬ your credit card balance in full each month to avoid interest charges. Any interest paid on the credit card will negate the savings you’re achieving on your mortgage. Failing to clear the balance in full could leave you worse oļ¬ ļ¬nancially.
Discipline is Key
While this strategy can be highly eļ¬ective in reducing your mortgage, it requires a high level of ļ¬nancial discipline and organisation to execute successfully. If you’re not careful, it can easily turn into a debt trap.
It’s also important to avoid overspending just because you’re using a credit card. Stick to your budget and only charge expenses you would have paid for anyway. If the temptation to overspend is a concern, you may be better oļ¬ making extra repayments directly to your loan instead of using an oļ¬set account.
Choosing the Right Lender and Products
To make the most of this strategy, you’ll need to ļ¬nd a lender that oļ¬ers a 100% oļ¬set account and a credit card with a generous interest-free period. Some key considerations:
Look for a lender that oļ¬ers a 100% oļ¬set account, where the full balance is deducted from your loan when calculating interest. We can assist you with this.
Choose a credit card with at least 55 days interest-free to maximise the time your money can remain in the oļ¬set account. (Note: Itās just as important to check out the credit card you intend to apply for as some have hefty fees, some have substantial rewards and not all rewards are equal. On top of this, credit card limits impact your borrowing capacity if you are planning further credit applications).
Your Brisbane Home Loans Broker will compare home loan interest rates, as some lenders may charge a higher rate for oļ¬set accounts.
Consider the overall fees and charges associated with the home loan and credit card to ensure you’re getting a competitive deal.
An experienced mortgage broker can help you navigate the options and ļ¬nd the right combination of products to suit your needs and ļ¬nancial situation.
Important Tip: If there is any possibility that you may wish to change the use of your owner occupied home to an investment property, please discuss with your accountant ļ¬rst, before adopting this strategy as it may not be for everyone.
Conclusion
Using a 55-day interest-free credit card in conjunction with an oļ¬set home loan can be a powerful way to pay oļ¬ your mortgage faster and save thousands in interest. However, it requires meticulous ļ¬nancial management and discipline to execute successfully.
If you have a high income, are excellent at budgeting, and can resist the temptation to overspend on credit, this strategy could be a game-changer for your mortgage repayments. But if you’re not conļ¬dent in your ability to manage credit responsibly, it may be best to stick to more straightforward methods of making extra repayments or using a redraw facility.
Ultimately, the key to minimising your mortgage is to have a well-organised ļ¬nancial system in place and to make paying oļ¬ your home loan a top priority. With the right tools and discipline, you can achieve your goal of becoming mortgage-free sooner rather than later.
Take charge of your mortgage and discover strategies that truly work for you. Call us or reach out to Brisbane Home Loans today for friendly, expert advice and solutions designed just for you.
Author | Jordan Sorbello, Mortgage Broker
Jordan Sorbello is a dedicated professional at Brisbane Home Loans, offering expert guidance on home loans and mortgage strategies. With a strong background in financial services, Jordan is passionate about helping clients navigate their home loan journeys. His focus is on providing personalised solutions that benefit both first-time homebuyers and seasoned property owners. Jordan’s deep understanding of the market and commitment to customer satisfaction ensures that clients receive the best possible advice and support.
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