HOW TO REDUCE YOUR MORTGAGE PAYMENTS WITH AN “OFFSET FACILITY”✂️

Have you ever heard of an offset mortgage? 🤔 If not, it's a great way to reduce the amount of interest you pay on your mortgage by linking it to your savings and everyday accounts.

Here's how it works: Let’s say you have a $600,000 mortgage and $50,000 across your savings and everyday accounts with one bank. With an offset mortgage, the total sum of these savings and everyday accounts is deducted from your mortgage balance, so, in this scenario you're only paying interest on $550,000 which reduces your monthly interest repayments and goes a long way to paying your home loan off faster!

So, what does that look like in terms of actual dollar savings? 

Using the scenario above, if you fixed the entire $600,000 mortgage for 2 years @ 5.99% with 28 years left to run the repayments would be around $3,687 per month.

But if we structured it to include an offset facility it would look something like this:

$550,000 fixed for 2 years @ 5.99%. Then a $50,000 offset facility which is linked to the $50,000 sitting in your savings and everyday accounts. As you will only be paying interest on $550,000 it reduces the repayments to around $3,380 per month - giving you a saving of around $307 per month (assuming you maintain that balance of $50,000 across your linked accounts).

What could you do with this $307 saving? You could put it straight back into your accounts to keep building on those savings or use it for other expenses which could come in handy for a lot of people right now.

You can really put your money to work by not only linking your own accounts but your children's and even your parents accounts if they are with the same bank and if you ask them nicely 😊. They still have full access to their own accounts, all you are doing is using the current balances to reduce the amount of interest you have to pay. 

So, if you tend to have savings on hand and keep cash in your accounts on a day to day basis you should definitely consider having an offset mortgage as part of your overall mortgage strategy. You can use the funds to reduce the interest but have the reassurance that they are there for whenever you need them.

There are only three banks that currently have an offset mortgage product so make sure you have a chat with me to see if it's suitable for you.  If you are not currently with a bank that offers this product, then now would be the time to get you properly sorted with one that does so you can truly put your money to work for you!