Offset Your Mortgage With A High Interest Savings Account
Using your savings account to reduce your mortgage is not only possible, but growing in popularity. This doesn’t mean taking all of your savings and making a lump payment on your mortgage loan. Your savings account stays right where it is. Just having the savings account is all you need.
Australian home loans are becoming easier to get and easier to manage because of a new thing called loan offsetting. The way it works is that you link your home mortgage to your savings account and the amount of your savings account offsets the interest on your mortgage. For example, if you have a home mortgage for $300,000 and have a savings account with $100,000 in it, you will only pay interest on $200,000 of your mortgage.
The higher your savings account grows, the more you can offset your home mortgage interest. Financial experts recommend this approach to a faster mortgage payoff. They say that you should have a high interest savings account and put everything you can into it. Including the money you use for paying your bills and day to day spending. Even though you will be taking this money out of the savings account during the month, with the right high interest savings account you can earn interest for the time it is there.
There are many other types of mortgage programs available in Australia, and even more popping up every day it seems. The mortgage companies realize that it’s a tough housing market right now and they are doing everything they can to earn your business.
Offsetting your mortgage is only one advantage of keeping a high interest savings account. The other advantage, of course, is that as you earn interest your money continues to grow (if you have more in savings account than your mortgage). Once your mortgage is paid off, the savings account will have quite a lot in it, and you could live on the home payment you are no longer making and leave your high interest savings to earn even more money for you.