Timeline for Are Offset Accounts OR Paying of Mortage Going to Give Me a Better ROI
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| Jun 16, 2020 at 10:49 | history | edited | CommunityBot |
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| May 28, 2020 at 4:38 | comment | added | Vality | @RonJohn Just to clarify this as it never got cleared up, an offset account is a perk offered by some mortgage companies. Predominantly in the UK. The account itself does not pay any interest but the balance in it is subtracted from the mortgage principal for the purposes of interest calculations. Effectively it acts like similarly to repaying the mortgage early with an offer to re-withdraw those early payments at the same interest rate if needed. | |
| Dec 30, 2019 at 21:38 | comment | added | RonJohn | @void_ptr so the offset account accrues interest, but that interest is automatically applied to the mortgage balance? | |
| Dec 30, 2019 at 14:48 | comment | added | void_ptr | The point of an offset account is to offset interest-bearing principal balance of a mortgage, while keeping the money in a liquid form. Nothing stops you from withdrawing that money (but not gains on it, because they get locked in the mortgage). | |
| Dec 30, 2019 at 7:50 | comment | added | RonJohn | @void_ptr what's to stop you from withdrawing money from the offset account? (That's what confused me when reading about them.) More importantly, what's the point of an offset account? | |
| Dec 30, 2019 at 6:37 | comment | added | void_ptr | Offset account balance reduces interest, and hence makes more money go towards principal balance. Thus, in a way, money in offset account grow at the same mortgage interest rate - it is just that these gains get in effect automatically "reinvested" into the mortgage, so you don't see them in the offset account. | |
| Dec 30, 2019 at 2:14 | history | answered | RonJohn | CC BY-SA 4.0 |