Offset mortgages and intelligent finance loans were first introduced in 1997 and were an import from Australia. Simply put, an offset mortgage or intelligent finance loans is where you use your savings in a bank account to lower the interest you have to pay on your mortgage. It is easier to explain intelligent finance loans and offset mortgages by using an example.
Jack Jones has savings of $163;40,000 and a mortgage of $163;240,000. To save money Mr Jones opts for an offset mortgage. He therefore pays interest on $163;200,000 rather than $163;240,000. If Mr Jones wanted to finance $163;20,000 for his daughter’s wedding next year, he could ask when he set up his mortgage for a borrowing limit of $163;260,000. That’s $163;200,000 for the mortgage, $163;40,000 in savings + $163;20,000 for wedding. He would then have a debt of $163;260,000 however due to the offset feature of his mortgage and his $163;40,000 savings he would only pay interest on $163;220,000 rather than the $163;260,000 owed after the wedding. The main point to remember with offset mortgages is that you only pay interest on the money you actually owe. In Mr Jones’ case prior to borrowing for his daughter’s wedding this figure would have been $163;200,000 and after the wedding $163;220,000.
During the credit boom of the late nineties and early millennium, banks started to expand the offset principle to include credit cards and current accounts. The lenders who offer offset mortgages and intelligent finance loans usually offer two types of offset mortgages.
1) Current account mortgages – these give the borrower a single account with a large overdraft. The borrower’s savings, current accounts, credit cards and loans are all combined into this single account. The interest rate offered varies from lender to lender. This has the obvious advantage that there is only one payment for the borrower to worry about.
2) The second option available for borrowers is where the borrower keeps their separate accounts however they are linked together. As no interest is paid on savings as it is tied into the intelligent finance loans, the offset mortgage is extremely tax efficient and a great way to lower the amount of taxes that are owed.
As with the example above, both types of intelligent finance loans or offset mortgages have borrowing limits set when the intelligent finance loans set up. The borrower can then spend up to their limit without any penalties being imposed. If you are looking for finance speak to an expert adviser.
By: Mark Inglis
Posts Tagged ‘Mortgage Loans’
Intelligent Finance Loans
March 10th, 2010Mortgage Loans After Foreclosure – How to Do Get Finance
February 7th, 2010
Mortgage loans after foreclosure can seem like an impossible dream if you are not long away from losing your home to foreclosure. Many people believe they are somehow not able to ever own their own home again and will never be able to enter the real estate market again. The truth however could not be more different.
Many lenders seem to now be taking a view that people do learn from their mistakes and that someone who has previously lost their home will have learnt from their mistakes and will be less likely to get into the same situation again. This is a key point. If you want to get a mortgage loan after foreclosure you must learn from your prior mistakes and put right what went wrong the first time round.
Instead of heading to the mainstream mortgage loan providers you should instead head to a specialist lender that focuses on providing finance for those with poor credit scores. By doing so you will greatly increase your chances of obtaining finance that will enable you to buy your home.
Most important of all is to take action. So many people fail to realize their real estate dreams because they feel sorry for themselves and sit back and d nothing. By taking action every single day you will dramatically improve your chances of success. Aim to set aside at least 30 minutes each day to further your research, improve you credit score or research finance companies. The more work you put into it the more you will understand what you need to do in order to succeed.
By: James McKerr
