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 account.
Offset account tariffs/rates:
Offset account currency: GEL, USD or EUR. The offset account currency should be the same as the loan currency.
A loan can only be linked to one offset account in the same currency. The amount of interest on a loan with an offset feature will be calculated according to the balance in the offset account (the offset balance).
Opening an offset 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 USD and the payment date is the 25th day of month. The client had 25 000 USD in the offset account from day 1 to day 15, and 0 USD from day 15 to day 25. Thus, from day 1 to day 15, the interest will accrue on 80 000–25 000=55 000 USD, while from day 15, the interest will accrue on the total loan balance, that is, 80 000.
If the Offset Feature is activated on the loan and the Repayment Schedule is revised at the same time, the monthly installment (amount payable) on the loan is calculated as follows: the monthly installment is slightly changed, the interest is saved (the interest accrued decreases in the amount payable on a monthly basis according to the Schedule), in proportion to the saved interest the portion of the principal increases in the amount payable on a monthly basis and after the revision of the Repayment Schedule, on the first date of payment, a higher amount is channeled to the repayment of the principal in favour of the Client than under the monthly installment before the revision. After the revised installment, the monthly installment equals the monthly payment under the Repayment Schedule before the revision. The rule of saving the interest is valid in the case of (at the time of) any revision throughout the validity term of the loan.
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.
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 USD and the payment date is the 25th day of month. The client had 25 000 USD in the offset account from day 1 to day 15 and 50 USD from day 15 to day 25. Thus, from day 1 to day 15 the interest will accrue on 80 000–25 000=55 000 USD, 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 offset activation price: 0.1% of the loan balance, min. 30 and max. 500 units.