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The Mortgage Vs Savings Debate

It’s the oldest finance question – should I make extra repayments on my mortgage or put into my savings account.

Like all Debates both strategies have their strengths and weaknesses, but which way is the way to go?? 

Savings 

Benefits of having a savings account is that it’s a solid and somewhat easy to access funds.

If you were to decide to use a savings account one would expect that research would be done to ensure that firstly, you have the right type savings account that suits your saving strategy and secondly, that you stick to your savings plan .   To Ultimately decide if savings is the right way to go you would need to calculate the interest and compounding rate and include the profits in the next years savings calculations ect. 

Mortgage Repayments

Paying off your homeloan more speedily could save you money on interest that would have incurred over the life of the loan however, some banks charge fees when you increase your repayments which would alter the ‘total savings’.

  Another Important note is that when you pay more off your property you build equity, which is an asset. In many cases you can use that asset similar to a bank account to increase your financial situation or borrowing capacity.  

Though this debate is plausible another option which may serve some better is to have a home loan with a loan offset account – its hard savings that you can access easily and instead of being paid interest it offsets the interest that would be payable for that amount on your home loan.   To find out more about refinancing to include a home loan offset account call your unlocked homeloans broker otherwise check out our blog on Mortgage Offset accounts!!!   

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