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In this video I’m going to show you 6 reasons why offset accounts are a complete stitchup for first time buyers.

In fact, following these steps saved one of my customers close to $60,000 and by watching until the end I’ll show you how you can too, so keep watching.

Links to the tools mentioned https://www.huntergalloway.com.au/tools/

00:00 Redraw vs Offset [Avoid the Offset Account Stitch up]
00:17 1. The Marshmallow Test
01:26 2. The Hidden Cost
02:58 3 Redraw vs Offset
05:00 4 When Redraw Is the best option
07:00 5 When an Offset Account Works
09:45 6 My Final Thoughts

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1. The Marshmallow Test

A simple test conducted at Stanford University in 1970 involving hundreds of children, each left alone in a room with a delectable delight.

Before they were left in solitude offered a choice: they could have one right away, or two if they just waited. Could they resist sweet temptation for 15 agonizing minutes, or surrender to instant gratification?

This is the first problem with an offset account, having 24/7 access to your offset account in the way of a debit credit card. Because if you use an offset account correctly, both income and expenses go into the same account.

So will you pass the marshmallow test? Answer yes or no to the following three questions;

• Are a budgeter?
• Do you prefer to save money over spending it?
• Do you find it easy to sacrifice for future goals?

If you answered yes to all three questions, then an offset account still might be for you.

Stick around because I’ll show you how to calculate whether an offset is worth it.

2. The Hidden Cost
As a first home buyer you might be shocked to find that some banks will force you to take a credit card with their package home loan, it’s the type of loan which offers offset accounts.

On average banks make $1,900 in interest on every credit card in Australia and ultimately comes at a hidden cost in applying for an offset account.

The next hidden fee is your loyalty. With a home loan package bank’s typically charge a $395 annual package fee, this is why the banks give you credit cards, offset accounts, insurance and other products either free or at a substantial discount.

What they’re trying to do is transition you to what’s called an MFI customer (that’s bank lingo for a main financial institution customer).

Think of MFI like Amazon Prime. Paying a fee creates a sunk cost and means you’ll try to get your money’s worth. In the United States this translates to Prime Customers spending more than double their nonprime counterparts. It essentially allows Amazon to make more money as people’s propensity to shop around decreases drastically!

Back to the banks, they too implement this strategy and at a certain point you’ll be so interwoven into their ecosystem that even the thought of leaving sends shivers down your spine.

The net results means you pay more and ultimately the banks profit BIG TIME.

So to know if you’ll be hit with hidden costs answer these three questions;

• Have you had a credit card in the past, and if so paid interest on the facility?
• Are you still with the same bank you were with as a kid?
• Do you value confidence over price?

If you’ve answered yes to all three questions, then offset isn’t for you.

3 Redraw vs Offset (use the example)

So let’s quickly touch on what an offset account is then look at the alternative.

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This video offers no Legal, Financial and Taxation advice, and the information contained is general and does not take into account your personal situation. The Listener acknowledges, consents and agrees to the viewing of the content presented on the Channel is subject to the full Disclaimer (below) and agrees to be unconditionally bound by this Disclaimer.

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