Offset mortgage: savings mortgage

by Katherine Lewis

Offset mortgages have been common in the world for almost two decades. We have the first swallows with this offer. Do you know what this is about and how such a mortgage will help you save money? So read on.

Parents can also help you get a better mortgage.

It is common practice that you save money before buying a property, then after comparing all the offers, you apply for the most advantageous mortgage, enjoy your new home and pay the installment with interest every month. However, there is a novelty in our market that can reduce your interest rates to a record low. We are talking about the so-called offset mortgage. An offset mortgage combines the benefits of savings and a mortgage loan.

How does an offset mortgage work?

How does an offset mortgage work?

The principle of such a loan is very simple, we will show it on the current example of a mortgage.

As we have already mentioned, an offset mortgage is a combination of a regular mortgage loan and a savings. At the bank, you will take out a mortgage with a standard interest rate – which, however, is usually slightly higher than the competitive offers on ordinary mortgages. At the same time, however, you will open a savings account in the same bank, on which you will save your savings.

These will reduce the interest rate of the loan by the percentage ratio between savings and the amount of the mortgage drawn.

The money you want to keep as a financial reserve can reduce your mortgage interest by up to half.

What does this mean in ordinary speech? You pay interest only on the part of the debt that exceeds the savings. If you borrow 100 thousand and get a basic interest rate of say 1.5%, all you have to do is have 50 thousand dollars in your savings accounts and your mortgage interest will be reduced to 0.75%. And that is already a significant saving of money.

In the case of this offer, it is currently possible  to link up to 5 different savings accounts to one loan. The bank then takes into account the entire amount you save – for each of your children or contributions from your parents.

With money in savings accounts, you can handle as much as you need. Of course, interest rates are regularly reassessed based on your amount saved.

Who is the offset mortgage for?

Who is the offset mortgage for?

Wondering who this offer is for? That if you had saved 50,000, would you rather invest them directly in buying real estate and take out a lower mortgage? See the following examples.

For whom are offset mortgages advantageous:

  • parents who save their children in savings accounts and do not plan to withdraw money so soon
  • Entrepreneurs who have the money but do not currently plan to invest, so they save the money in a savings account
  • anyone who has saved money but wants to keep it as a financial reserve and does not plan to use it to finance the property
  • young families whose parents or loved ones want to help reduce interest rates – all you have to do is save money on an account linked to a credit  

Saving for your offspring can reduce your mortgage interest.

Tip: Credit and savings accounts are not directly linked to an offset mortgage, the owner of the saved cash does not even have to be related to the borrower. In addition, he can withdraw money at any time and dispose of it as he needs.

An offset mortgage is a pleasant diversification of the market offer for some those interested in a housing loan. If you are not interested and you are looking for ways to choose the most advantageous mortgage, calculate it using our hypocalculator.