Pay Less Interest on your Mortgage

Did you know you are able to offset your mortgage interest through the use of a high interest savings account? Yes, its true – you can reduce the interest you owe by Saving Money. This does not mean making large payments into your mortgage from your savings account, your money does not have to move – instead you just need an account that is dedicated to nothing but your savings.

The concept of loan offsetting is what this topic is called. The way loan offsetting works is by linking your mortgage from your house to your dedicated savings account and in turn the amount of your savings account offsets the interest on your mortgage.

Mortgage Offset Example

Imagine you had a mortage for $500,000 AUD and a savings account that had $100,000 in it that you have been saving for a rainy day or as part of your strategic regular savings plan. As a result of this mortgage offset you will only pay interest on the amount you owe minus your savings, eg; $400,000 in total.

Obviously as your savings account grows you will be able to offset more of your mortage. This allows you to regularly save without facing the problem most people have, interest that erodes their net worth. Financial professionals in Australia reccomend this concept as it will allow you to pay off your mortgage quicker whilst building a nest egg.
I suggest putting all your monthly pay cheque and money into a high interest account so that come time when you need to use it (whether it be for bills, child care or shopping etc) you will have already earnt 7+ % interest on it for a number of days.

Benefits of Offsetting your Mortage

Should you decide that this is the right financial option for you, this is the positives that I see could come out of it;

• Reduced amount you have paid in interest.
• Your savings will grow over time for when you have paid off your mortgage.
• Your money earns money for you, but currently its taxed the same as income. The Australian Government should lower tax rates on Savings so that we have an incentive to save – I still can’t believe I have to cough up money to pay for interest my money has earned as its treated like regular income.

Looking for a High Interest Savings Account to Offset your mortgage?

I suggest you read my article about choosing the right high interest account by clicking HERE

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