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Now that punitive home-loan exit fees are banned,you can just leave.Credit:Matt Davidson

So,some lenders are banks,building societies or credit unions. Others are non-banks.

Many of the cheaper ones are non-banks. However,importantly,they could also be non-banks that"white label"a banking product – because of fewer overheads in the form of branches – and can charge much less.

The regulations are similar – the Australian Securities and Investments Commission controls the licensing for all lenders. Additionally,the Australian Prudential Regulation Authority (APRA) oversees banks,building societies and credit unions (or products issued by them through another lender),but that is more about ensuring they have sufficient liquidity to protect their depositors.

What is key in your decision is what would happen if a non-bank lender goes out of business. The answer is your loan would be on-sold to another lender … that might put the rate up.

However,now that punitive loan exit fees are banned – unless you have a fixed rate,in which case they couldn’t up the interest anyway – that’s no problem:you just leave.

Having said all that,I still like banks,building societies or credit unions … or non-bank lenders that"white-label"bank products. That is because you have to be regulated by APRA to be an authorised deposit-taking institution.

And here’s the punchline:offset accounts offered by other lenders (not authorised to take deposits) can be dangerous. They are simply redraws in disguise,which means any additional payments you make sits in the loan itself,rather than more safely quarantined alongside of it.

So Sal,I asked Mozo to research the top-five variable-rate mortgages with"real"offset accounts,because not only should you make all additional repayments into such a separate account for safety,but these can also save you a ton of interest.

Say you are able to hold $30,000 at all times – your emergency fund of preferably six months spending – in an offset account against a typical $400,000,25-year mortgage. This would slash your interest bill by $66,000 and time in debt by nearly 2.5 years (at a 5 per cent interest rate).

You could also supplement this with my"offset-on-steroids"strategy. Simply put all your monthly expenses – we will assume about $10,000 – on a credit card with a long interest-free period (if you trust yourself with credit),and shift the money out of your offset account and onto the card only when your monthly bill is due. This will bring your savings to $85,000 and three years.

So,just what are Australia’s lowest genuine-offset-account home loans?

The cheapest and next-cheapest are both bank-backed:non-bank lenders Well Home Loans (2.17 per cent variable with a $10 monthly fee for an offset account) and Tic:Toc (2.19 per cent variable with,again,a $10 monthly offset fee).

Next are Queensland Country Bank (2.49 per cent),Illawarra Credit Union (2.5 per cent),and ING and a neobank called 86 400 (both 2.54 per cent).

"Reduce"is neither a bank nor bank-backed. The choice is yours.

Nicole Pedersen-McKinnon is the author ofHow to Get Mortgage-Free Like Me. Follow her onFacebook,Twitter orInstagram.

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