Monday 1st Aug 2016
The A grade strategy savvy property investors use to pay down home mortgage debt faster.
If you are holding a mortgage on your own home and are not using an “OFFSET ACCOUNT” you are more than likely paying hundreds of thousands of dollars extra in interest payments over the term of the loan. What could you do with for example, an extra $200,000 in savings over the term of the loan?
What is an Offset Account?
What we often see when we initially meet with our clients, is that very few do not have a debt reduction strategy to pay off their home mortgage quicker.
This is a strategy that savvy property investors use and one that the banks won’t tell you about when you take out your mortgage – This is when you require a knowledgeable and well experienced finance broker on your team!
An offset account is essentially a savings account directly attached to your home loan account which means any funds you have sitting in this account at any one time will reduce the interest payable on your home loan, paying off your loan faster without making any extra repayments.
Example on How it Works:
If for example you have a $450,000 mortgage and you have an offset facility set up with say, $20,000 dollars in savings in it, this would mean that you would be only paying interest on $430,000 reducing your interest which is calculated daily.
On top of this you have your salary of say $8,000 dollars per month going into your offset account, only then are you paying interest on $422,000. To truly benefit from this strategy, you then get a credit card with 55 days interest free, to pay all your monthly expenses, bills etc, and then pay the credit card off in its entirety before the end of the 55 days interest free period. This allows you to use your salary and savings to remain in your account for as long as possible, reducing daily interest charges. This debt reduction strategy is using the banks money to pay off your home loan faster, without making any additional repayments. It can save you hundreds of thousands of dollars and knock years off your loan term.
Is This You?
What I often come across is that mortgage owners have separate savings accounts for different things that they put money aside for each week – e.g School fees, holidays, car rego etc. They would be earning very little or zero interest on that money in a standard savings account. If however, they put it all into the offset account to their home loan it would be saving them circa 5% in interest and if interest rates do rise in the future it would be saving them even more. Its all about working smarter with your money and not harder for it!
Are you maximising your cash flow? The team at Curtis Property Group can provide the education and ongoing support that is required to reach your financial goals. Get in touch today for your complimentary review by clicking on the links or call Wade Curtis directly on 0438 206 446 www.curtispropertygroup.mysit3.com
The information provided is of general in nature and not to be taken as financial advice. We recommend you seek independent professional and legal advice before employing any such strategies to ensure they are suited for your personal circumstances.
