Offset is a loan feature based on which the bank calculates the amount of accrued interest. The product is intended for individuals who have mortgage loans.
An offset account: the borrower's/co-borrower's non-interest bearing card/current account (the account does not accrue interest).
Offset card/current account fees and rates:
Offset account currency: GEL. The offset account currency should be the same as the loan currency.
Opening an offset card account:
The term of offset – shorter or equal to the term of the loan with an offset feature.
Interest calculation on a loan with an offset feature:
If an offset feature is activated on a loan, the amount of interest is calculated as follows: the loan balance – the offset balance * annual interest rate / 365 * number of days.
Example: The client's loan balance is 80 000 GEL and the payment date is the 25th day of month. The client had 25 000 GEL in the offset account from day 1 to day 15, and 0 GEL from day 15 to day 25. Thus, from day 1 to day 15, the interest will accrue on 80 000–25 000=55 000 GEL, while from day 15, the interest will accrue on the total loan balance, that is, 80 000.
If the repayment schedule is revised on a loan on which the offset feature is activated, the amount of monthly payments, reduced through offset, will change back to the amount before offset, but with a different structure: the share of interest will be reduced and the share of principal will increase, for the benefit of the client. Thus, on the first payment date following the revision of the schedule, the client will pay more towards the loan principal than he/she used to before revision. This plan will apply to any revision in the repayment schedule during the term of the loan.
Example: The monthly payment on a loan is 500 GEL. Once the offset feature is activated, the payment decreases to 300 GEL. However, if the repayment schedule is revised during the period when the offset feature is active, on the first payment date after the revision, the reduced payment amount (300 GEL) will change to equal the amount before the activation of offset (500 GEL), with one important difference: if before offset, 200 GEL out of 500 GEL went towards principal and 300 GEL towards interest, after the activation of offset and revision of the repayment schedule, the first payment under the revised repayment schedule will have the following structure: 400 GEL out of 500 GEL will go towards principal and GEL 100 towards interest.
If an offset feature is activated, the loan amount to accrue interest can be reduced down to 50% of the loan balance the lowest.
Example: The loan amount is 100 000 USD and the borrower has 100 000 USD in the offset account for 7 days. During these 7 days, the interest will accrue on 50 000 USD (the difference between the loan balance and the offset balance but no less than 50% of the loan balance).
The calculation is based on the daily (end-of-day) balance in the offset account.
Payment: the client will benefit from offset in terms of accrued interest, while the scheduled principal remains the same.
The minimum offset balance to count is 100 units.
If the end-of-day offset balance is less than 100 units, the offset feature will not apply.
Example: The client's outstanding loan amount is 80 000 GEL and the payment date is the 25th day of month. The client had 25 000 GEL in the offset account from day 1 to day 15 and 50 GEL from day 15 to day 25. Thus, from day 1 to day 15 the interest will accrue on 80 000–25 000=55 000 GEL, while from day 15 the interest will accrue on the total loan balance, 80 000, as the offset balance is below the minimum threshold – 100 units.
The offset feature can be activated on new as well as existing mortgage loans.
The Bank may unilaterally cancel the offset feature anytime, without notifying the client in advance.
The offset activation price: free.