It really gets me that a rational, obvious mechanism for reducing the cost of mortgages is dressed up and only accessed though a right wing political site as if it is some socio-political solution!!
The scheme is common here in the UK , though take up is slow because, frankly, people are a bit slow-witted.
I have this kind of mortgage and it is called ‘interest offset’. It is from Barclays who may be in SD.
Basically you have a mortgage account and a checking account with a bank . If you have positive balance on your checking account it is used to reduce the mortgage account each month solely for the purpose of calculating the mortgage interest rate. There is no interest earned on the current account.
Thus I and others who use it, stop putting spare cash anywhere except that checking account.
The net cost of your mortgage is reduced because the reduction in the interest payments on the mortgage exceeds the interest you could earn from putting the spare money on deposit anywhere else.
in other words, the interest rate on your savings is , in effect , the interest rate you pay on your mortgage.
Your mortgage would have to be ARM I would imagine.
Of course, you have to check that the original mortgage is a good one: ie there is no point entering this clever scheme if the mortgage deal has higher rates than other mortgage deals.
If a mortgage permitted you to pay in and withdraw anytime you like, it would have the same effect, but I understand that your arrangements for doing that (Heloc?) are at a higher rate than the main mortgage and are therefore not comparable to a true interest offset mortgage.
