Is a Mortgage Interest Saver Account Right for You?
If you’re a home owner looking for a way to statically pay off your mortgage sooner, then you should consider a mortgage saver account. The purpose of this account is to help the homeowner pay down the principal balance of his existing mortgage quicker. A mortgage saver account is actually a savings account, but the money saved in this account will help offset the interest charged each month on your home loan. The offset account helps homeowners shave years off the life of the mortgage and countless dollars in interest.
How does a mortgage interest saver account work?
Banks and financial institutions offer homeowners a way to reduce the principal balance on their home faster with a dedicated savings account. After the loan has been established you can link a transaction account to your loan. The transaction account is a standard savings account that you can add or withdraw funds from at anytime. However, the true benefit of this account is with your home loan. The money saved in this account is used daily to offset your loan balance. Each month this helps to reduce the mortgage interest charged on your account by banks or financial institutes.
Consider your current principal balance on your mortgage is $150,000. Each month the bank calculates your interest rate based on your principal balance. But, if you had $5,000 saved in a mortgage saver account, the bank would reduce your principal balance when calculating your interest rate. Therefore, your monthly interest rate will be calculated on $145,000. The savings account helps reduce the interest paid back to the bank each month. The money you have saved on the interest payment goes towards reducing your home loan principal balance.
If you have a large sum of money in your offset account you can drastically cut years off your home loan and save thousands of dollars. The transaction account also works by having your pay checks deposited into this account. Therefore, you don’t need a large sum of money in this account to benefit from the savings on your home loan. If you are in the market for a mortgage saver account or offset transaction account find a bank that will offer you:
- An account with no limit. One that you can continue to build your saving and reduce your home loan.
- An offset account that will apply 100% of your account balance to offset your loan.
- An account that offers you an equal interest rate that are the same as your mortgage.
The interest earned in your Mortgage Saver account will also offset your mortgage interest. You will further benefit from this account, because it is completely tax-free. If you have a mortgage on your home you, should consider an offset transaction account. No matter how much money is in your account you will benefit from this account and reduce the life of your mortgage.