How Can You Save on Mortgage Interest with a Mortgage Link Account?

When applying for a mortgage, the repayment term can extend up to 30 years. It takes a long time to pay off a property, and the associated costs can be substantial. Many people often express how burdensome mortgage payments can be, so what are some ways to save on mortgage interest? 

In addition to offering cash rebates, many banks provide Mortgage Link accounts to ease the burden of mortgage payments and attract more customers. But what exactly is a Mortgage Link account? 

A Mortgage Link account is a high-interest current account designed specifically for mortgage customers. The account’s interest rate matches the mortgage plan rate, and the savings can be used to offset mortgage interest costs. Generally, most banks cap the savings limit in a Mortgage Link account at 50% of the outstanding loan, though some may increase it to 60%, depending on the mortgage plan you've applied for.

Additionally, some banks allow up to three accounts to be linked to the high-interest Mortgage Link account. Borrowers can share the benefits with immediate family members (including parents, spouses, and children), but the savings limit will be split equally among all linked accounts.

It’s important to note that the interest on a Mortgage Link account is calculated daily and settled monthly. For example, if the current mortgage interest rate is 4.125% and the homeowner deposits HK$100,000, the interest earned for that month would be HK$343.75 (calculated as HK$100,000 x 4.125% ÷ 12 = HK$343.75). 

There are various high-interest products on the market, such as funds, bonds, fixed deposits, and stocks. Many people compare Mortgage Link accounts to fixed deposits, as both are low-risk options. So, how should homeowners decide between the two?

In fact, if the interest rates are similar, either option works, and the choice depends on the homeowner’s individual needs. Mortgage Link accounts have a maximum deposit limit, whereas fixed deposits do not. Therefore, if a homeowner has substantial cash and wants to maximize their interest earnings, a fixed deposit is recommended.

However, Mortgage Link accounts offer more flexibility. Mortgage customers can withdraw funds at any time, while fixed deposits require the money to be locked in for a specified period. With fixed deposits, you can only withdraw your principal and interest upon maturity, and early withdrawal may result in penalty fees.

Will banks offer Mortgage Link accounts for the entire mortgage term? According to the signed mortgage loan agreement, if the borrower misses payments, the bank has the right to cancel the high-interest account at any time. Essentially, as long as the homeowner makes timely payments, the account should remain active. Therefore, it's crucial for borrowers to avoid late payments to prevent losing this benefit. 

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