Does USA have Offset accounts??

Discussion in 'Property Investment - Other' started by Bandita, 22nd Jul, 2008.

  1. Bandita

    Bandita Member

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    Hi all,

    Not sure where this thread should go - however, in speaking with my friends and family in the USA - they have no idea what "offset accounts" are?? Is this because they don't have them (they claim they don't) and it's an Australian phenomenon - I can hardly believe that. However the majority of people go for a 30 year fixed loan (at less then 6% at the moment!! :eek::eek:) where of course offset accounts would be irrelevant.....

    Can anyone tell me - does the USA have offset accounts?

    Thanks,
    Jen
     
  2. DavidMc

    DavidMc Member

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    Hi Jen,

    That's right. The Australian banking system is quite advanced and ahead of the UK and US. I was surprised too. I remember talking to a UK banker about Offset accounts and they mentioned they had only briefly heard about it in a 'bank technology ... of the future!!' seminar.

    I think in the US they probably don't exist because most people opt for a fixed loan. Even in Australia you can't do fixed with offset as far as I'm aware.
     
  3. tobe

    tobe Mortgage Broker

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    There are few lenders who will give you an offset with a fixed rate. Some credit unions and mortgage managers with Adelaide ne Bendigo bank.

    There are some other interesting diferences overseas. For instance balloon payments in the US where interest is capitalised for O/O loans, and sliding fixed rates in the UK where the rate is variable until a certain level where it becomes fixed. It effectively guarantees an interest rate lower than x, rather than just guaranteeing x rate for the term.
     
  4. ianvestor

    ianvestor Future Middleman

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    I remember 'capped' rates on home loans from way before I was even old enough to have a job. Around 1990-ish? Can anyone confirm this?
     
  5. LynnH

    LynnH Member

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    ianvestor

    Capped rate loans were certainly around in the mid-to-late 1980s, but I can't tell you when they first became available.

    Cheers
    LynnH
     
  6. HiredGoon

    HiredGoon Banned

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    I remember an article from 2006 where Australians were going over to the USA to discuss our advanced mortgages - apparently Australian mortgage finance is some of the most "innovative" in the world.

    Whatever we've done, we've managed to borrow ourselves into higher household debt than the UK and USA and push house prices higher compared to wages than both those countries.

    Over here on Somersoft, I'm sure innovating mortgage financing and high debt are badges of pride. The were too in those other countries, at least while prices were going up......
     
  7. marg4000

    marg4000 Member

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    Capped rates were introduced when interest rates climbed dramatically in the late 1980s and early 1990s, peaking at the famous (or infamous) 17% or higher.

    There were far more controls on banks then, so a ceiling of 13.5% was placed on existing savings bank loans. These were for PPORs only. Any investment loans were through the trading bank arm of the bank and always at a higher interest rate.

    This was politically motivated and protected people who already had loans, therefore avoiding wholesale mortgage defaults. The entire "recession we had to have" would have been a bloodbath without it.

    Just imagine, to have a 13.5% rate was an enviable position to be in.

    BTW, we commenced building our first home in 1974, interest rate 6.25%. Before we moved in, Gough Whitlam decided the economy needed to be slowed to put the rates up 2% - in one go. From then then interest rates moved in minimum 1% increases.
    Marg
     
  8. boomtown

    boomtown Member

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    I kinda wondered how people got through that one.
     
  9. Peter Parker

    Peter Parker Member

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    Though inflation and wage increases were around 10%, and if you were a public servant in Whitlam's time you got a 25% pay hike thanks to Clyde Cameron. So what seemed a large amount of money soon became quite small due to inflation, provided you could hang on in the early years. Interest only would have been fantastic!
     
  10. s_t

    s_t Member

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    I imagine the only reason we have offsets is to get around our stupid tax system. If you dump money into a loan or LOC and then withdraw it, it can stuff you up with tax deductibility, so the offset was invented to get around it......

    (I don't really know if that is why it was invented, but its a good guess I reckon ;) )