I've been studying up on offset mortgages a lot recently although still fairly new to the concept - No sorry, I'm not a bank or Broker here to sell anything..
Here I am to share my findings in hope to help others and hopefully to learn more from your comments both from those who have more constructive criticism, positive and negative as well as you who are using / have used or do offer this method already.
Generally:
If you did none of the follow tricks but still paid the same monthly amount you were with a normal Principal & Interest loan the overall interest paid & years to pay off would remain the same as a normal P&I Mortgage.
The following benefits I believe allow you to use money to work for you rather than for the bank.
Benefits:
* Pay interest only - Smaller compulsory payments
* You can (would) continue to pay the same amount you would with Principal & Interest Loan, offsetting the difference
- When you deposit anything extra on top your interestable total (principal) decreases
- Resulting in lower interest owed decreasing your monthly interest accumulated
- Resulting in less interest owed decreases so more of your original monthly deposit remains in your offset account to continue this three step cycle
* Charged Monthly but 'Calculated Daily':
- Having your income paid into the offset account then using it to pay your bills some days later would result in an interest saving for those extra days your bill money lay waiting
- Money you're not going to spend for sometime be it a day or months will still save interest costs
* Extra Credit bonuses:
- Using credit cards to pay expenses gives you up to 55 more days of interest offsetting
- Credit card points & Credit Score earned with above method
- Using Balance Transfer deals to borrow money at 0% - low% to place in offset account
- Debt management such as keeping on top of full credit card payments can be automated
* Can link to other accounts both yours and other immediate family members:
- Money usually left in your saving accounts accumulating a small amount of interest would be saving you higher amounts of interest in your offset account
- No 'savings account' interest earned thus no tax on it
- Doesn't matter if you pay repayments monthly or fortnightly as income will instead instantly be in your offset
* Emergency access to money otherwise gone to principal repayments
* No extra fees issued with adding extra $s paying it down
Issues:
* Self control not to spend now accessible money required
* Higher floating interest rate than fixed mortgages
Not sure:
* Bank Fees
- Opening & Monthly may be higher
Rough math stats:
* Example: Normal 30 year $300,000 Mortgage at 6.55% Paying $1,906 Per month = Approx $685,000
- A single $1,000 left in offset from the beginning would save you around $6,000 and be paid off about four months early
- $25 extra held per month (total $33,000) would save you around $66,000 and over four years
Imagine what difference offsetting savings, term deposits and other accounts could do for you
Very keen to get this conversation flowing so we can learn more from each other.
* I'm sure there's loads more advantages & disadvantages to be discussed.
Here I am to share my findings in hope to help others and hopefully to learn more from your comments both from those who have more constructive criticism, positive and negative as well as you who are using / have used or do offer this method already.
Generally:
If you did none of the follow tricks but still paid the same monthly amount you were with a normal Principal & Interest loan the overall interest paid & years to pay off would remain the same as a normal P&I Mortgage.
The following benefits I believe allow you to use money to work for you rather than for the bank.
Benefits:
* Pay interest only - Smaller compulsory payments
* You can (would) continue to pay the same amount you would with Principal & Interest Loan, offsetting the difference
- When you deposit anything extra on top your interestable total (principal) decreases
- Resulting in lower interest owed decreasing your monthly interest accumulated
- Resulting in less interest owed decreases so more of your original monthly deposit remains in your offset account to continue this three step cycle
* Charged Monthly but 'Calculated Daily':
- Having your income paid into the offset account then using it to pay your bills some days later would result in an interest saving for those extra days your bill money lay waiting
- Money you're not going to spend for sometime be it a day or months will still save interest costs
* Extra Credit bonuses:
- Using credit cards to pay expenses gives you up to 55 more days of interest offsetting
- Credit card points & Credit Score earned with above method
- Using Balance Transfer deals to borrow money at 0% - low% to place in offset account
- Debt management such as keeping on top of full credit card payments can be automated
* Can link to other accounts both yours and other immediate family members:
- Money usually left in your saving accounts accumulating a small amount of interest would be saving you higher amounts of interest in your offset account
- No 'savings account' interest earned thus no tax on it
- Doesn't matter if you pay repayments monthly or fortnightly as income will instead instantly be in your offset
* Emergency access to money otherwise gone to principal repayments
* No extra fees issued with adding extra $s paying it down
Issues:
* Self control not to spend now accessible money required
* Higher floating interest rate than fixed mortgages
Not sure:
* Bank Fees
- Opening & Monthly may be higher
Rough math stats:
* Example: Normal 30 year $300,000 Mortgage at 6.55% Paying $1,906 Per month = Approx $685,000
- A single $1,000 left in offset from the beginning would save you around $6,000 and be paid off about four months early
- $25 extra held per month (total $33,000) would save you around $66,000 and over four years
Imagine what difference offsetting savings, term deposits and other accounts could do for you
Very keen to get this conversation flowing so we can learn more from each other.
* I'm sure there's loads more advantages & disadvantages to be discussed.
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