by Diana Clement
The new offering called TotalMoney allows up to 10 accounts from one extended family to be grouped together and then offset against a mortgage, reducing the amount of capital outstanding and as a result interest charges.
If not offset against the mortgage, the total capital in the grouped accounts will be pooled together and interest paid on a tiered basis according to the total money invested by the group.
Offsetting differs from revolving credit in that the various accounts, whilst grouped for pooling benefits remain separate, whereas a revolving credit account puts all your money in one pot, which some investors can find difficult to control. In addition, you receive benefits for your children’s or parents’ savings, whilst that money remains theirs.
At any time, investors can decide whether accounts are pooled to earn higher interest or offset against mortgages. Individual accounts can be switched between pooling and offsetting by the account holder online.
A TotalMoney grouping can be formed by families, non-trading companies such as LAQCs, and family trusts, which can have up to 10 sub accounts with unlimited transactions for $10 a month in fees with no EFTPOS fees, ATM charges for BNZ machines, honour fees, or charges to set up and change direct debits, and automatic payments.
The biggest beneficiaries of this new offering will be family groups. However it does have benefits for property investors who have investment properties in their own names, within LAQCs, or family trusts.
In the case of investors who hold investment properties in their own name, they will be able to pool family accounts together to reduce the variable portion of either the mortgage on their own home or on the investment property/properties.
When it comes to investment property held by a family trust that also has other accounts with the bank, the outstanding mortgage will effectively be reduced by the total savings held by the family trust in other TotalMoney accounts.
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