Offset Mortgage as the name indicates is the type of the mortgage that has an additional offset attached to it. In order to explain offset mortgage we can say that it is a traditional mortgage along with one or more deposited accounts attached with this mortgage. For example the savings balance in a savings account can be used as an offset along with traditional mortgage to create offset mortgage. However to implement offset mortgage the account and the mortgage loan must exist in the same bank or financial institution. In order to enjoy offset mortgage the credit limit or the loan is predefined and the interest rate on this credit limit or the loan is also predefined. As we know in most of the banks the savings account is mostly a non interest bearing account as a result the bank can earn a positive return on the absence of the interest that will help the bank in maintaining the mortgage offsets.
When the mortgage payment is made to the client the total interest is calculated on the remaining principle amount of the account that is granted to the customer deducting the aggregate savings from one or more deposit accounts of the customers. The loan borrowers or the clients have access to their savings for each month and if the client removes the money from the saving account the next mortgage payment calculated on a higher principle amount. Offset mortgage is a common financial entity in foreign countries like UK however it is not used in United States of America due to tax laws.
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