Wednesday, July 05, 2006
[RealEdge] TodayOnline : Save big on your home loan interest
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| Save big on your home loan interest Wednesday July 5, 2006 With interest rates rising fast, you might feel the pinch every time you pay the monthly instalment on your housing loan. Trying to grow your money in a savings account would yield a relatively small return, judging by the average of interest rates in the market now not much considering that the interest rates charged on housing loans in the market are in excess of what is paid to depositors. Save on your interest payments To help you save on interest payment, HSBC's SmartMortgage links your home loan account with a current account. The current account pays the same interest rate as what you are paying on the home loan, helping you offset the loan interest. For example, if you are paying interest at the rate of 3.5 per cent on your housing loan, the current account will pay you 3.5 per cent in interest. Every month, the interest earned on the current account is automatically used towards paying the interest on your home loan. That means while the monthly home loan instalment amount remains the same, whatever interest you earn from the balance in your current account is used towards principal repayment, allowing you to reduce your outstanding loan faster. Allotting more of your instalment to paying the principal means helping you pay down the loan faster, which in turn helps you save on your overall interest charges. HSBC will send you a monthly statement on your account, showing you exactly how much you have paid in interest, and how much you have earned from your current account. HSBC's SmartMortgage is a variable rate loan pegged to the current board rate, so even if your home loan rates increase according to the interest rate environment, your current account interest rates will remain equal to that of your home loan. No lock-in feature With the savings on interest, you can pay off your loan more quickly, and it helps that there is a no lock-in feature on the loan. This means you can choose to completely pay off your home loan anytime and you will not incur any penalty for early redemption. You also have the flexibility to make partial pre-payments, so you can pay additional amounts whenever you want, to help pay down the loan. A flexible money management tool The current account also gives you flexibility when managing your finances. You can choose to put in whatever amount of money you want into the account, be it a one-time lump sum or monthly savings, and interest will be paid to you on the amount you have in the account (up to the loan amount outstanding in your home loan account only). Just like a normal current account, you have the option of taking money out of the account should you need to use the money urgently. Speaking about how SmartMortgage was conceptualised, Mr Tom Tobin, head of personal financial services, HSBC, explained: "We came up with SmartMortgage to give more value to our customers, in particular those savvy customers who want to manage their cash flow for savings, investment and borrowing needs, all within HSBC." He added that the product was launched to reward the customers for having a total banking relationship with HSBC. This is the first of a four-part series on HSBC's SmartMortgage. Look out for the next instalment on Saturday, July 8 in Weekend Today. | |
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// posted by Shajahan @ 10:12 AM 