Mortgage Offset Account for Investment Property
Purchasing investment property is a big financial decision that should not be taken lightly. Mortgage offset accounts have the potential of saving you money on interest when it comes to making mortgage repayments, but what exactly are offset accounts and how are they beneficial to you?
What is a Mortgage Offset Account?
Mortgage offset accounts can be described as a type of transactional account that is linked to your existing loan with the potential of saving you money on interest by offsetting the amount you owe on your existing mortgage agreement, also known as the principal loan amount.
How Can a Mortgage Offset Account Save Money on Interest?
Mortgage offset accounts have the potential of saving you money on interest by offsetting the amount you currently owe on your existing loan. As you may know, your mortgage provider calculates interest on a daily basis and charges it to you monthly. By depositing your savings and earned income into your offset account regularly, you can save money.
If you have an investment loan with a principal amount of $600,000 and a balance of $300,000 in your linked offset account, you will only be required to pay interest on $300,000.
Benefits of a Mortgage Offset Account
A mortgage offset account is a loan feature that has the potential of greatly benefitting you throughout your investment loan term. As we discussed, mortgage offset accounts have the potential of saving you money on interest, but, it can also decrease your loans term and allow you to pay off your mortgage faster.
Mortgage offset accounts can also save you money on taxes. The interest you save by using your offset account is not subjected to taxation because it is considered your personal savings.