Offset Mortgage

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Dictionary Says

Definition of 'Offset Mortgage'

A type of mortgage that involves blending a traditional mortgage with one or more deposit accounts; the savings balance(s) held in the latter can be used to offset the mortgage balance. Both the account and the loan are held at the same banking institution, and an initial loan balance (or credit limit) is established, along with an interest rate. The savings account is typically a non-interest bearing account, allowing the bank to earn a positive return on any balances in the account.

When each mortgage payment is made, the interest is calculated on the principal remaining in the mortgage account, minus the aggregate amount of savings in the one or more deposit accounts. Borrowers still have access to their savings; if money is removed from savings during the month, the next mortgage payment will be calculated on a higher principal balance.

For example, if the mortgage principal is $225,000 and $15,000 was held in savings during the last month, the interest due would only be calculated on ($225 – $15) = $210,000.
Investopedia Says

Investopedia explains 'Offset Mortgage'

This is a very attractive option for people that can be diligent savers - even though the savings account won’t earn any interest, they are typically low-earning accounts that only pay 1-3% per year. Chances are that the interest rate on the mortgage is substantially higher, so any savings there is a net benefit to the borrower. Meanwhile, the foregone interest on the savings account becomes non-taxable payments towards the mortgage.

Offset mortgages are common in many foreign nations, such as the U.K., but are currently not eligible for use in the U.S. because of tax laws.
Search results for

'Offset Mortgage'

  • Reduce Interest With An All-In-One Mortgage

    http://www.investopedia.com/articles/mortgages-real-estate/08/offset-mortgage.asp
    ... The British version, which is called an offset mortgage, is slightly more
    straightforward; the mortgage is simply linked to a non-interest bearing account. ...

  • Conquering The Terms Of Your Mortgage

    http://www.investopedia.com/articles/mortgages-real-estate/08/loan-to-value.asp
    ... Borrowers who do not have the requisite credit rating or ability to generate enough
    income to offset mortgage liabilities will still find it hard to dictate ...

  • Watch Out For "Junk" Mortgage Fees

    http://www.investopedia.com/articles/mortgages-real-estate/08/mortgage-closing-costs-fees.asp
    ... relationships or products. (Offset mortgages combine a checking account,
    home-equity loan and mortgage into one account. Learn more about ...

  • 9 Things To Know Before You Refinance Your Mortgage - Investopedia ...

    http://financialedge.investopedia.com/financial-edge/1010/9-Things-To-Know-Before-You-Refinance-Your-Mortgage.aspx
    ... Private Mortgage Insurance (PMI) Homeowners who have less than 20% equity in their
    home when ... due to a refinance may not be low enough to offset the additional ...

  • Will You Break Even On Your Home?

    http://www.investopedia.com/articles/pf/07/breakeven-point.asp
    ... Private mortgage insurance; Brokerage fees; Closing costs; Property taxes; Mortgage
    interest ... will need to appreciate each year in order to offset these expenditures ...

  • JPMorgan Chase Looking More Pedestrian

    http://stocks.investopedia.com/stock-analysis/2011/JPMorgan-Chase-Looking-More-Pedestrian-JPM-BAC-C-USB-PNC0413.aspx
    ... banking, treasury services and asset management were more than offset by a ... its retail
    financial services segment on "elevated losses in the mortgage and home ...

  • What Will The Cost Of Living Be In 2012? - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/1211/The-Cost-of-Living-in-2012-The-Fundamentals.aspx
    ... families and consumers must tighten their belts and consolidate for the next 12
    months, and offset their own ... Current Rates. Savings Home Equity Mortgage Auto. ...

  • Interest-Only Mortgages: Home Free Or Homeless?

    http://www.investopedia.com/articles/mortgages-real-estate/08/interest-only.asp
    ... This default risk can be offset by this loan's potential to reduce prepayment ... Thanks
    to the deductibility of mortgage interest, mortgage loans are one of the ...

  • How To Deduct Home Business Expenses - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0112/How-To-Deduct-Home-Business-Expenses.aspx
    ... return. These deductions are used to offset the taxable gross income on the return. ...
    Current Rates. Savings Home Equity Mortgage Auto. Savings ...

  • JPMorgan Chase Less Risky Below Book Value

    http://stocks.investopedia.com/stock-analysis/2010/JPMorgan-Chase-Less-Risky-Below-Book-Value-JPM-GS-MS-FII-LM1014.aspx
    ... as a 33% decline in investment banking income was offset by big ... bank witnessed "good
    underlying performance of our businesses", though mortgage losses could ...

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