- 03
- Sep
As interest rates continue to rise, and as more and more people are looking for ways to reduce the cost of their home loan, one method which has been proving popular with many customers is to opt for the offset mortgage. These mortgages work well for people with a lot of savings, or a lot of cash in their current account, as the bank will reduce the amount of your remaining loan that you have to pay interest on by the amount that you have sitting in your other accounts. So for example, if you have a mortgage rate of 6 per cent, and you have some savings. You would have to be earning a very good savings rate on these savings, especially after tax is taken into account, before you would be earning as much in interest as you could save if you simply off set this money against your mortgage.
Off set mortgages will not be for everyone however. You need to have a fairly high amount of money in your account for an off set mortgage to be worthwhile. This is because you usually pay higher fees for off set home loans, and you usually get slightly higher rates on your mortgage as well. Most advisers recommend that you have between seven and ten per cent of the value of your mortgage in savings before you consider taking out an off set loan as otherwise the fees and the higher interest rate on the mortgage will make the deal not worthwhile.
