Katrina Parrington

Mortgage & Finance Broker, Elders Home Loans – Northern Territory – P. 8932 8900

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 1,640 other followers

  • Elders Home Loans

  • Katrina Parrington

    I am a long term Centralian resident with more than 18 years experience in the financial services industry. Initially, in Real Estate in Adelaide before pursuing a career with Elders Insurance Alice Springs and lending roles with major banking institutions where I gained extensive experience in Home Loans and Commercial Lending here in the Alice and in Darwin.

    I have a unique set of skills that ensures I understand your lending needs and can provide you with professional advice and personal service.

    Tel: 08 8953 8800
    email: katrina.parrington@eldershomeloans.com.au

  • Advertisements

Save years & $$

Posted by Katrina Parrington on March 26, 2012

How would you like a savings account with an interest rate 60 basis points (or more) above the best savings accounts on the market, that is not only delivered tax-free, but could also help to clear your mortgage years early?
It might come as a surprise, but when it comes to finding a great savings rate, your home loan could be the answer. That’s because for savers, a mortgage offset account can offer a good, tax-free return with a rate that’s hard to beat.

How does it work?

A mortgage offset account operates in a similar way to a transaction account, but is linked to a home loan. The ‘savings’ balance is offset against the balance of your loan, so you only pay interest on the difference.

When used in the right way, a mortgage offset account can cut years off your home loan and save you thousands of dollars.

For instance, if you took out a $300,000 mortgage and had an offset account with $15,000 in it you will only pay interest on the balance of $285,000, which over 25 years could save you almost $20,000 in interest (assuming you maintain a $15,000 balance and pay a rate of 7 percent interest).

With mortgage rates typically higher than savings rates, the benefit you get from not paying interest often outweighs the loss of a savings return and if you need to access the money you have saved it is readily available.

At the time of writing, the average interest rate on mortgages with an offset feature is 6.62 percent, according to databases. That’s about 0.6 percentage points above even the best high-interest savings accounts on the market, which boast maximum rates around the 6 percent mark.

Is it for you?

Offset mortgages are a great tool for regular savers, but they can also provide a great tax-free place to stick one-off lump sums, tax returns or a work bonus.

Unlike most high-interest savings accounts, which require a saver to meet certain conditions to achieve a bonus rate, offset accounts ‘pay’ richly for every dollar you deposit without lock-in contracts. So if you want to be more in control and have greater flexibility with your savings, a mortgage offset can be a great option.

If you opt for an offset account don’t rush to pull your savings out of your high-interest savings or term deposit account prematurely, because by doing so may mean sacrificing some interest. Contact your institution before withdrawing funds and compare mortgages with offset accounts before making your move.

Advertisements

One Response to “Save years & $$”

  1. Best Ptc!Emprego…

    […]Save years & $$ « Katrina Parrington[…]…

Sorry, the comment form is closed at this time.

 
%d bloggers like this: