Alright, let's talk about something that can put a bit more cash in your pocket when it comes to mortgages – offset mortgages – my favorite mortgage product. They're not your run-of-the-mill mortgage; Offset mortgages are like your mortgage's cool, money-saving BFF. Instead of keeping your savings and mortgage separate, they team up to help you out.
So, here’s the deal….Imagine you've got a $500,000 mortgage, but you've also saved $20,000 in your savings account. With an offset mortgage, your $20,000 in savings isn't just sitting there; it's working some behind-the-scenes magic. It gets offset against your mortgage balance. So, you'll only pay interest on the part of your mortgage that's left after deducting your savings. In this case, it's $480,000, not the full $500,000.
There is twist in that, while your savings are busy cutting down your mortgage interest, they won't be earning any interest for you during this period. It's a bit of a trade-off, but the savings on your mortgage payments can often outweigh what you'd earn on your savings in a regular account.
The big plus with offset mortgages is they can save you some serious cash. Mortgage interest rates tend to be higher than what you'd get on a typical savings account. So, by putting your savings to work offsetting your mortgage, you could end up ahead.
Different banks offer them with their own unique twists. Take BNZ's TotalMoney, for example. They let you link up to 50 bank accounts, even those belonging to your family members. The cool part? The interest on your offset mortgage gets calculated every day. That means you and your family can access your cash savings while also tweaking the amount of mortgage interest you pay. Save more, and you'll owe less on your mortgage interest – it's a win-win!
You could think of it this way - Offset mortgages are like a financial seesaw. Imagine your mortgage as one side of the seesaw, and your savings as the other. The more savings you have, the heavier your savings side becomes, lifting the mortgage side off the ground. As a result, you pay less interest because you're only balancing the weight of what's left on the mortgage side. However, the catch is that your savings don't earn any interest during this time. So, it's like a seesaw where the heavier your savings side, the less you pay, but your savings don't go up or down while you're on the seesaw. It's a trade-off that can save you money on your mortgage payments.
So, if you're all about saving money and getting a handle on your mortgage, offset mortgages might be your new best friend. Sure, your savings won't be earning interest, but the potential savings on your mortgage payments make it a deal worth considering.
If you think an Offset Mortgage could be in your future give us a shout at MortgageMe or click here to book in a convenient time to speak with us.