Reducing Interest Using Mortgage Offset Accounts

Mortgage offsetting is a growing payment scheme for home loans today because it gives the borrower the ability to pay the loan by linking it to their savings account. The balance in the account is then used to offset the loan due before interest. This takes out a big portion of the principal loan.

It does sound enticing to some, but there are other points to consider before opting for this payment scheme.

The borrower has to make sure that there is a sufficient sustainable balance on the savings account linked to the loan, otherwise there will almost be no interest savings. This offset account is not effective, as it is the just the same with paying the loan more than the minimum.

Mortgage offsetting is only allowed for variable interest rate loans, although there are lenders who have offered this scheme for fixed rate loans. It is still best to go through the home loan packages with a financial adviser as these are strategies that are only effective if done correctly.

You can read more about this on the Australian Times website.