What is an Offset Mortgage?

An offset mortgage is a type of loan that combines savings and a mortgage into the same product. A home buyer can deposit their check directly into the account and save money on mortgage interest. Here are a few things to consider about the offset mortgage and how it can benefit you. 

Offset Mortgage

With this type of loan, a savings account is tied to a mortgage loan. The interest on the loan is calculated on the amount of principal balance from the mortgage, minus the amount of money that is in the savings account. Typically, the savings account does not earn any interest. 

Example

Let's say that you have a mortgage balance of $150,000. At the beginning of the month, you have $20,000 in savings. The lender would then subtract $20,000 from $150,000 in order to get a balance of $130,000. The interest for the month is calculated on the $130,000 balance, instead of the full $150,000. 

Benefit

This type of mortgage can provide you with a way to save money on the interest of your mortgage while keeping access to your savings. If you need money, you can always access it just like a regular savings account.

blog comments powered by Disqus