What is an Offset Mortgage Account?
An offset mortgage account is one in which you put all of your accounts together and only pay interest on the difference between your liabilities and your assets. So if you had a $100,000 mortgage but a $20,000 balance in your checking account, interest would be charged on only $80,000 – the assets “offset” the liabilities. In many cases, the credit balance doesn’t earn any interest but you “save” what you would’ve paid in mortgage interest. This makes it effectively a tax free gain and very tax efficient. (these accounts are also known as current account mortgages) A friend of mine, who lived in the UK for years, paid off her house very quickly (think 360K GBP in under 4 years) and was surprised something like this didn’t exist in the United States. She mentioned that the biggest “shock” in setting up an offset mortgage, hers was in a One Account by Virgin Direct (at the time) and RBS, because you just saw an enormous negative number. If you can imagine, logging into your bank account
