| Offset mortgages have been around for a few years | | | | 2) Interest offered for savings and current account is |
| in the Singapore home loan scene and has been | | | | relatively very attractive, compared to many other |
| relatively popular with people who know how to make | | | | types of financial instrument. |
| use of such instrument to offset their interest. An | | | | 3) Especially advantageous for those who are able to |
| offset mortgage allows a home owner to offset any | | | | pay off for a property in its entirety or able to save |
| interest with the cash deposit in their savings or current | | | | large amount of money. |
| account. The main factor of this instrument is, with an | | | | Cons of an Offset Mortgage |
| offset mortgage, the savings or current account that | | | | 1) An offset mortgage allows you to draw out your |
| goes with it earns a relatively higher interest rate than | | | | funds freely and it is definitely not for the undisciplined |
| normal accounts. The interest earned offsets the | | | | investors/ savers. |
| interest you have to pay for your home loan. | | | | 2) These mortgages are normally only effective if you |
| For example, if you are having a home loan of | | | | placed about 10% to 20% of your funds into the |
| $1,000,000 at 5%. With a 100% offset mortgage, you | | | | savings and current account. Of course the more the |
| will be given a savings or current account that earns | | | | merrier, but every offset mortgage has a cap as to |
| you 5% interest on the deposit. If you were to place | | | | how much of your funds can earn a high interest rate. |
| $1,000,000 as deposit, you virtually do not pay any | | | | 3) Variety of offset mortgages is not many and only a |
| interest for your home loan at all. This allows you to | | | | few banks offer it. |
| save dramatically from your home loan. Some people | | | | 4) You definitely have to use the savings or current |
| will think that why they should place it as a deposit | | | | account that your home loan is tied to, which |
| when they can just pay off the home loan entirely. | | | | effectively ties you to their product. |
| That is because this instrument keeps you liquid, | | | | There are numerous home loan products out there for |
| allowing you make use of any investment opportunities | | | | you to choose from and an offset mortgage is |
| that has the potential to hit above a 5% return | | | | definitely one to consider if you are thinking of paying |
| immediately. | | | | off your property purchase in full. Planning properly and |
| Pros of an Offset Mortgage | | | | choosing the right product is the key to preserving |
| 1) A flexible instrument that normally allows you to do | | | | your wealth in the long run. |
| pre payments. | | | | |