13:02 04 January 2014
If you have a savings account and are looking to earn a handsome interest from it, you have to ensure that the rate of interest is approximately 3.39 per cent and above. However, the trend that is being witnessed in savings accounts is quite the opposite and worrying. The rates have gone to an all time low of 2 per cent and decreasing still. Solutions to this conundrum are leaning towards offset mortgages.
Offset mortgages are being seen as the answer to this interest rate issue.
People fear what is alien and this applies to the concept of this type of mortgage. However, you can leverage this type of mortgage and save a bundle monthly. At least this savings aspect outweighs any worries that you might have regarding mortgage.
How does it work?
Since it is a novel concept, a lot of people are curious about how it works. The idea is simple: you “offset” the cost of the mortgage against the savings you have in the bank. You basically end up lowering the amount of interest you pay as the mortgage amount you end up paying is lowered.
The options available
If you are contemplating about getting an offset mortgage, you can get one at 2.2 per cent for a two-year fix. If you want a five-year fix, you can get one at a rate of 3 per cent.
Two sides of a coin
While the promise of savings is quite tempting, you have to contend with the high cost of getting one. For you to enjoy the real benefits of this mortgage, you have to have huge saving.
Other factors that affect the cost of the mortgage are the nature of the taxes you pay. With offset savings exempted from tax, taxpayers who pay more taxes potentially stand to enjoy more benefits of this type of mortgage than ordinary taxpayers do.
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