What is the idea behind having a deposit account to offset the interest rate?
Whether you are looking to refinance your existing mortgage or planning to opt for a new one, offset mortgages can help you save considerably on interests. An offset mortgage is a type of mortgage loan that links your mortgage to a deposit savings account. Any amount deposited in the mortgage savings account is used to reduce the amount of interest charged on the mortgage. Your deposit earns an interest that is close to the interest charged for the mortgage loan, thereby offsetting your interest costs. Essentially, when your savings rise, your mortgage interest rate reduces, offering you interest savings.
How can you benefit from offset mortgage loans?
Besides the obvious benefit of home loan interest rate savings, an offset mortgage also lets you choose between lowering your repayment tenure and paying lower monthly instalments. Consequently, your mortgage term could be cut by months or, even, years depending upon the total savings deposited in the interest offset account. For e.g., if your offset rate is 50% and the loan charges an interest of 2%, you will earn 1% (50% of 2%) on your deposit (up to loan outstanding amount) in the offset account. As a result, the loan interest will be offset by the amount of interest earned on the deposit. Hence, the interest paid towards the loan is reduced considerably, which ultimately reduces your loan tenure as well.
Who Should Opt for Offset Mortgage Loans?
One of the best things about offset mortgage is that it is suitable for all types of financial profiles regardless of whether you are a saver or a spender. Even if you do not prefer to save much on your offset account, you can have your salary paid directly into your offset account. This will give you an immediate benefit as the interest on offset mortgage loans are calculated on a daily basis. Alternatively, if you are a punctual saver, an offset account will be more financially beneficial as you may earn less interest on a savings account than you would save on your mortgage interest rate. Therefore, regardless of your financial habits, an offset mortgage account can help you save on interest and attain financial freedom faster.
Disclaimer
The information contained in this document (“Information”) is for general information and/or educational purposes only and does not have regard to the investment objectives, financial situation or particular needs of any specific person. No part of the Information may be reproduced, copied in any manner or distributed to third parties without the prior written permission of Citibank Singapore Limited (“CSL”). The Information is provided “as is”, without warranty of any kind, it has not been independently verified by CSL, its related entities and their respective officers, employees, directors and agents (collectively, the “CSL Group”). Use of the Information is at your sole risk.
The CSL Group shall not be liable and expressly disclaim liability for any error or omission in the content of the Information, or for any actions taken by you or any third party, in reliance thereon. The Information is not guaranteed to be error-free, or to be relied upon for investment purposes, and the CSL Group makes no representation or warranty as to the accuracy, truth, adequacy, timeliness or completeness, fitness for purpose, title, non-infringement of third party rights or continued availability of the information.
To the maximum extent permitted by law, the CSL Group shall not be liable for any loss or damage of any kind whatsoever (including, without limitation, any special, consequential, incidental or indirect damages, or damages for loss of profits, business interruption, and any and all forms of loss or damage, regardless of the form of action or the basis of the claim, whether or not foreseeable) arising out of the use of the information (provided in any medium), even if any member of the CSL Group, has been advised of the possibility of such loss or damage.
< Previous Useful Tips & Guides
Comparing various mortgage options
Whether you are looking to refinance your existing mortgage or planning to opt for a new one, offset mortgages can help you save considerably on interests. An offset mortgage is a type of mortgage loan that links your mortgage to a deposit savings account. Any amount deposited in the mortgage savings account is used to reduce the amount of interest charged on the mortgage. Your deposit earns an interest that is close to the interest charged for the mortgage loan, thereby offsetting your interest costs. Essentially, when your savings rise, your mortgage interest rate reduces, offering you interest savings.
How can you benefit from offset mortgage loans?
Besides the obvious benefit of home loan interest rate savings, an offset mortgage also lets you choose between lowering your repayment tenure and paying lower monthly instalments. Consequently, your mortgage term could be cut by months or, even, years depending upon the total savings deposited in the interest offset account. For e.g., if your offset rate is 50% and the loan charges an interest of 2%, you will earn 1% (50% of 2%) on your deposit (up to loan outstanding amount) in the offset account. As a result, the loan interest will be offset by the amount of interest earned on the deposit. Hence, the interest paid towards the loan is reduced considerably, which ultimately reduces your loan tenure as well.
Who Should Opt for Offset Mortgage Loans?
One of the best things about offset mortgage is that it is suitable for all types of financial profiles regardless of whether you are a saver or a spender. Even if you do not prefer to save much on your offset account, you can have your salary paid directly into your offset account. This will give you an immediate benefit as the interest on offset mortgage loans are calculated on a daily basis. Alternatively, if you are a punctual saver, an offset account will be more financially beneficial as you may earn less interest on a savings account than you would save on your mortgage interest rate. Therefore, regardless of your financial habits, an offset mortgage account can help you save on interest and attain financial freedom faster.
Disclaimer
The information contained in this document (“Information”) is for general information and/or educational purposes only and does not have regard to the investment objectives, financial situation or particular needs of any specific person. No part of the Information may be reproduced, copied in any manner or distributed to third parties without the prior written permission of Citibank Singapore Limited (“CSL”). The Information is provided “as is”, without warranty of any kind, it has not been independently verified by CSL, its related entities and their respective officers, employees, directors and agents (collectively, the “CSL Group”). Use of the Information is at your sole risk.
The CSL Group shall not be liable and expressly disclaim liability for any error or omission in the content of the Information, or for any actions taken by you or any third party, in reliance thereon. The Information is not guaranteed to be error-free, or to be relied upon for investment purposes, and the CSL Group makes no representation or warranty as to the accuracy, truth, adequacy, timeliness or completeness, fitness for purpose, title, non-infringement of third party rights or continued availability of the information.
To the maximum extent permitted by law, the CSL Group shall not be liable for any loss or damage of any kind whatsoever (including, without limitation, any special, consequential, incidental or indirect damages, or damages for loss of profits, business interruption, and any and all forms of loss or damage, regardless of the form of action or the basis of the claim, whether or not foreseeable) arising out of the use of the information (provided in any medium), even if any member of the CSL Group, has been advised of the possibility of such loss or damage.
< Previous Useful Tips & Guides
Comparing various mortgage options