Offset Mortgage Explained
If you want to pay lower interest on your mortgage or shorten your payment terms, you have an option in offset mortgages. But how do they work?
Trusted Mortgage Brokers advice you that if you arrange an offset mortgage with your bank, your savings account is connected to your mortgage. In exchange, you agree to forego any interest that your savings might have earned if it weren’t attached to the mortgage.
So if you have a $100,000 mortgage and you have $10,000 in your savings account, you can arrange for the bank to shorten your payment term but pay the same amount, or lower the payments and leave the payment term as is.
The good thing about this arrangement is that you can always take your money back. Your savings are not held hostage by your bank.
Another thing that makes this arrangement a good one is the fact that family members can contribute to the money pool for offset mortgage.
You might want to contact your bank for this kind of arrangement.
Most people go about paying their mortgage oblivious to the fact about offset mortgage. If they are not oblivious, they are misinformed, which is a crying shame. You can get more knowledge about mortgage details here https://www.trustedmortgagebrokers.co.uk/offset-mortgage-guide/ online.
Even with only $2,500, you can shorten your 25-year $100,000 mortgage by seven months or so. Of course, this makes certain assumptions, like the interest rate is two percent per year.
Your bank might have different terms and conditions that cover offset mortgage. If your bank does not offer to offset, you can take a mortgage with another bank that does offer offsetting and use the money to pay the first mortgage. But that’s just an idea we have.