Everything You Should Know About Offset Home Loans
Explore comprehensive insights into offset mortgages, including how they work, the application process, and tips for securing the best deals. Understand the unique aspects of our local mortgage industry and stay updated on market trends to make informed decisions when purchasing property. Learn about leveraging lender competition for advantageous loan terms and streamline your mortgage journey with expert guidance.
Everything You Should Know About Offset Home Loans
An offset home loan combines a traditional mortgage with one or more savings accounts, allowing the funds in these accounts to offset the loan balance. Both the mortgage and savings accounts are held at the same financial institution, with the loan accruing interest at a set rate. The savings accounts often do not earn interest, enabling the bank to generate profits from the deposited funds.
With each mortgage payment, interest is calculated on the outstanding principal minus the amounts saved in relevant deposit accounts.
Borrowers can access their savings whenever needed. If funds are withdrawn during the month, the next interest calculation will be based on a higher principal amount.
The mortgage market here functions differently than in many other countries, being more paperwork-intensive. Lenders often bundle mortgage loans into securities for investors, enabling banks to quickly lend out new mortgages.
Related: 6 Strategies to Purchase a Home Without a Mortgage
How to Secure a Mortgage Loan
Applying for a mortgage typically involves working with a broker. Many lenders partner with banks, but alternative financiers are also available. Remember, mortgage brokers do not approve loans directly; they have established relationships with various banks.
You'll need to submit several documents, including:
Proof of employment and income
Addresses from the past two years
Bank and savings account statements
Purchase and sale agreement
Credit report
In some cases, fewer documents may be required, especially if a reputable broker connects you directly with a bank. Although such loans tend to be pricier, the application process is faster, and pre-approval can help demonstrate serious intent to sellers.
Leveraging Competition in the Market
If you're planning to buy property locally, note that the mortgage market is highly competitive. Banks compete to offer better deals; therefore, it's wise to compare options and select a suitable lender.
Typically, your current bank may be the easiest option, especially if you have an existing relationship. This can simplify and expedite the application process.
Stay Informed About Mortgage Trends
Follow us on Facebook and Twitter for the latest updates on mortgage and investment opportunities.
