Offset Mortgages

By
Real Estate Sales Representative with Castles Unlimited®
An offset loan is a type of lending arrangement, usually a mortgage, in which a borrower also maintains a savings account with the lender.  Instead of receiving interest on the savings account, the interest payment due on the loan is calculated only on the net balance of the loan less the savings account. The regular payment is calculated on the full amount of the loan, however, so making regular payments will payments will pay off the loan faster than a standard loan with the same interest rate, amount and periodic payment.

Offset mortgages are available in Great Britain and Australia, but have not been very available in the U.S., mainly because they somehow don't pass IRS muster.  However, according to Money Magazine two U.S. companies have a version of the offset mortgage that passes IRS muster.  The two companies are: CMG Financial Services and Macquarie Mortgages USA. 

Macquarie Mortgages has several products which are similar to an offset mortgage.  They seem to be based on a 30 year variable interest equity line of credit, where there are only interest is paid the first 10 years. Depositing funds into the mortgage and using their equity to pay monthly expenses keeps the principal balance lower, which reduces the amount of interest paid over the life of the loan and can also mean accelerated payoff.

CMG Financial Services has a product called Home Ownership Accelerator, which seems to be similar to the Macqarie Mortgages product.  It is also based on a 30 year equity line of credit, where interest only needs to be paid during the first 10 years. Again you can make direct deposits or add funds. This reduces interest and accelerates payoff also.

These seem to be interesting alternative to a standard mortgage.  Does anyone have experience with these type of mortgages and know of any other mortgage companies which have them. 

 

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Rainmaker
571,918
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
James,  Interesting theory.  Why do U.S. lenders not have this product readily available ?  Surely, some of the lender folks here will help.
Nov 23, 2007 01:06 AM #1
Rainmaker
108,759
Kevin Hancock
Evergreen Home Loans - Poulsbo, WA
The Hancock Mortgage Team

I just met with an AE from CMG today and he explained to me how the program works.  It's definately an interesting concept... I am going learn more about it and then blog on AR with the info.  There is an LO here in my office who has closed several of these loans and had positive things to say about the program.

Dec 06, 2007 11:35 AM #2
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Rainmaker
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James Lowenstern

Castles Unlimited. Newton MA Real Estate
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