Offset mortgage calculators are helpful tools for determining loan payments after you open an offset mortgage account. Offset mortgage calculators use the loan amount, property taxes, and the interest rate to calculate your monthly payments on an offset mortgage.
And opening an offset account is extremely beneficial, since it allows loaners to reduce interest payments on a part of the mortgage when there’s credit in the account. Therefore, instead of paying a mortgage loan in full, loaners are only responsible for paying a portion of it.
With that in mind, here’s a guide to using an offset calculator to determine how much you can save.
What is an offset account?
An offset account is a bank account tied to a home loan. In other words, each dollar kept in your offset account can reduce (or offset) the remaining loan balance. This allows loaners to pay off loans more quickly while accruing less interest.
Depositing money into an offset account is similar to making additional mortgage payments. However, offset accounts allow loaners to withdraw money to spend when necessary. They operate like traditional savings accounts, but money does not generate interest.
Loaners looking to reduce their loan balance can transfer savings to their offset account and withdraw money if needed. It’s important to keep in mind that withdrawing money leads to a higher interest payment, while keeping money in the offset account for a longer period of time provides more benefits.
If you’re interested in opening an offset account, make sure to do research beforehand to figure out which type of account is best for you. Most accounts are 100 percent offset, meaning that each dollar in the account offsets the principal loan balance in full.
Other accounts are partial accounts, meaning that depositing one dollar into the account would only offset the principal loan by a portion of the dollar. Partial accounts are less common and are typically associated with fixed-rate mortgages.
When should you use a calculator?
A calculator can be used when shopping for a home loan or when considering an offset mortgage. Using a calculator can help you figure out how much opening an offset account can save you in comparison to a traditional home loan.
Make sure to use an offset mortgage calculator in the initial stages of loan shopping, in order to help you decide if an offset mortgage is worth the investment. In addition, these calculators are useful for anyone interested in switching their home loan from a traditional mortgage to an offset account.
Is personal information required?
Unlike most loan calculators, an offset mortgage calculator does not require any personal information, such as your name, date of birth, or tax identification number. However, you’ll need information relating to your home loan, including the loan amount, loan term, interest rate, repayment frequency, and (if applicable) the offset account balance.
Are the results accurate?
This type of calculator offers homeowners a convenient way to determine whether an offset mortgage is the best option for their current financial situation.
Offset mortgage calculators require you to enter information related to the loan, and the results are accurate so long as the information entered into the calculator is correct. Since each borrower and loan varies, a calculator should only be used to obtain an estimate.
For anyone interested in switching to an offset mortgage, a calculator can give you an idea of how much money it can save. On the other hand, if you’re looking for professional advice, consider contacting a local broker to talk through mortgage options moving forward.
Opening an offset account and using an easy mortgage offset calculator can help you save money on your mortgage while accruing less interest. Whether you want to order canvas prints or new furniture, you’ll be able to focus on finding and decorating your dream home while avoiding the stress of high mortgage payments.