What is an 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. 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

An Offset Mortgage is a mortgage, usually a first lien equity line that is tied to a traditional checking or savings account.. Since the interest rate is a variable rate and it's based on the Average Daily Balance, by having your regular pay checks deposited into this account, it temporally lowers your mortgage balance, thus lowering the interest you pay... There was a lender that offered this type of product call the Home Ownership Accelerator Mortgage.. With this mortgage, without making any changes to your spending habits, you could pay off your mortgage in nearly half the time.. I have done several of these types of mortgages, and it is a great financial tool, however it's not for everyone.. You need to have at least 30% equity, low debt to income ratios, and 740 or above credit scores.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com