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Home Saver Interest Account Citibank: In-Depth Review

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Citibank, a prominent player in the global financial landscape, has a significant presence in Singapore. It has provided a comprehensive suite of banking and financial services since 1902. Among the different services it offers, Citibank Singapore’s innovative product – Home Saver is particularly noteworthy. This unique product has garnered a lot of attention for its innovative features.

Designed with customer-centricity in mind, this home loan product allows homeowners to save money and pay off their mortgages faster. Borrowers can offset even up to 100% of their mortgage interest!

This comprehensive guide will provide an in-depth understanding of the Citibank Home Saver account in Singapore, potential advantages and drawbacks and who will benefit from it.

What is Citibank Home Saver Account?

Also known as Cash Management Account, Citibank’s Home Saver is an interest-offset mortgage account that merges a home loan with a savings account, providing borrowers greater control over their mortgage and the flexibility to save on interest payable.

With high property prices in Singapore, a home loan is often necessary to finance a purchase. Citibank’s Home Saver offers a unique advantage by offsetting mortgage interest with your savings. It helps make homeownership more attainable while providing flexibility with your savings.

Home Saver is a great tool to efficiently manage mortgage payments and cash flow, making the financial commitment of homeownership more manageable and the dream of owning a home more achievable.

Citibank Home Saver checking account allows you to use your high cash savings while keeping them readily accessible. The more you save, the less mortgage interest you pay, but the savings remain available for use at any time. It combines the benefits of lower mortgage costs due to interest offset and flexibility of cash flow, making it a smart choice for those with substantial savings.

How does Citibank Home Saver Account work?

With the mortgage loan interest offset feature, Citibank helps you save on your home loan interest. To get the best out of the Citibank Home Saver, it is important to understand how it works.

Understanding the Mechanics

Here’s a simplified version of how Home Saver works: Citibank looks at your Home Saver account and outstanding home loan and figures out which one has a lower amount.

Then, they apply what’s called an ‘adjustment rate’ to this lower amount, which can be up to 50% of the effective mortgage interest rate. The most you can offset is up to 50% your mortgage expenses although the exact percentage may vary depending on how the interest is compounded.

So, if your home loan interest rate is 4%, for example, the interest on the funds in your Home Saver account could be calculated using an adjustment rate of up to 2%.

It can be rephrased as “50% of the money deposited in the Home Saver account will earn the same interest rate as your mortgage loan.” Any excess deposits will earn 0.125%.

The interest earned on your Home Saver deposits, after the application of the adjustment rate, is then used to offset the interest on your home loan in Singapore. The offset acts like a credit or deduction, effectively reducing the amount of interest you need to pay on your home loan. This is why, Citibank sometimes refers to this interest paid as an “adjustment.”

Here’s an example:

Home loan amount$800,000
Interest rate charged4%
Interest Offset per year(½ of 4%) of $50,000   2% x $50,000 = $1,000
Interest offset per month$83.33

Let’s look at how much a borrower could save with Citibank Home Saver’s mortgage interest offset feature, assuming a home loan of $1 million for a new private condo for 30 years, with interest payable at compounded SORA.

If you maintain a deposit of $250,000:

Effective First-Year Interest Rate (EIR)Monthly InstalmentInterest saved in 30 yearsLoan tenure
3.37% p.a.$4,694$245,19426 years 3 months

If you maintain a deposit of $500,000:

Effective First-Year Interest Rate (EIR)Monthly InstalmentInterest saved in 30 yearsLoan tenure
2.88% p.a.$4,694$401,43423 years 11 months

If you maintain a deposit of $750,000:

Effective First-Year Interest Rate (EIR)Monthly InstalmentInterest saved in 30 yearsLoan tenure
2.39% p.a.$4,694$487,75522 years 9 months

If you maintain a deposit of $1,000,000:

Effective First-Year Interest Rate (EIR)Monthly InstalmentInterest saved in 30 yearsLoan tenure will be shortened to
1.93% p.a.$4,694$512,65022 years 7 months

Note: Values shown above are strictly for illustrative purposes and intended to give an indication of the savings on your mortgage loan interest, which a borrower could enjoy based on certain assumptions, including but not limited to loan parameters. The values will vary according to your loan tenure and the prevailing interest rates.

Key Benefits of Citibank Home Saver Account

The following benefits offer a unique way to manage your home loan and overall financial health more effectively:

1. Interest Savings

The most substantial benefit of the Citibank Home Saver is the potential for considerable interest savings. The deposits in the Home Saver account offset the home loan principal, which consequently reduces the interest portion of the monthly payments.

Therefore, the more you deposit into your Home Saver account, the less interest you will be charged on your home loan. It can lead to significant savings over the life of your loan, especially if you are diligent in depositing into your Home Saver account.

2. Full Liquidity

Unlike other loan repayment plans where your money is ‘locked up’ until the loan is fully paid, the Home Saver account allows you to deposit and withdraw your savings at any time without penalties, providing them with much-needed liquidity.

It gives you access to your funds for unexpected expenses or investment opportunities without impacting your home loan’s progress. Also, there’s no limit on the number of deposits or withdrawals, allowing you to manage your funds according to your financial situation and goals.

3. Potential to Shorten Loan Tenure

You can significantly reduce your loan tenure by maintaining a significant balance in your Home Saver account. Since the balance in the account offsets the home loan principal, a consistently high balance will reduce the principal at a faster rate than originally scheduled.

As a result, you could potentially repay your entire home loan earlier than the original tenure. It is a significant advantage if your goal is to become mortgage-free sooner.

4. No Penalty on Early Repayment

Many traditional home loan products levy a penalty for early loan repayment. That is not the case with Citibank’s Home Saver. You are allowed to repay your home loan ahead of schedule without incurring any fees. It gives you the freedom to aggressively pay down your loan when you have extra funds without worrying about additional costs.

As with any financial product, the suitability of the Citibank Home Saver would depend on your financial situation, lifestyle, and long-term goals.

Who would benefit from Citibank Home Saver Account?

People often wonder, “Why wouldn’t homeowners use their savings to pay down their mortgage instead of leaving it in the bank?” The straightforward response revolves around financial strategy, or ‘leverage’, and individual choice.

Maintaining a strong cash reserve is a strategic financial decision. It’s about balancing debt reduction and having funds available for emergencies, opportunities or unforeseen expenses. While repaying a home loan faster decreases the total interest paid, it can tie up funds you might need elsewhere.

With Citibank Home Saver, homeowners can leverage their savings to reduce mortgage interest and retain access to their money. It offers a unique balance of debt management and liquidity, suiting those who prioritise flexibility and preparedness for unexpected circumstances. Here are some types of borrowers who may find it particularly beneficial, including:

1. Disciplined Savers

The primary benefit of the Home Saver mortgage loan is when the account maintains a healthy balance consistently. It reduces the amount of principal on which the interest is calculated, leading to significant interest savings. As such, individuals who are disciplined in their saving habits and can regularly contribute substantial amounts to the Home Saver account stand to benefit the most.

2. High-Income Earners

Individuals with high income or regular surplus income can deposit their excess earnings into the Home Saver account. It allows them to maximise the interest offset feature and could potentially shorten their loan tenure significantly.

3. Borrowers Seeking Flexibility

As Citibank’s Home Saver loan allows borrowers to deposit and withdraw from the linked account as needed, it is beneficial for individuals who value liquidity and want the freedom to access their savings without penalty.

4. Borrowers Planning Early Loan Repayment

The Citibank Home Saver is a good option for individuals planning to repay their loan earlier than the stipulated tenure. This product does not levy penalties for early repayment, allowing borrowers to reduce their debt burden without additional cost when they have extra funds.

5. Financially Savvy Borrowers

Those with a good understanding of financial products and the potential risks of fluctuating floating interest rates could benefit from Citibank’s Home Saver account. These individuals can manage their accounts strategically to maximise interest savings.

It’s important to remember that while Citibank’s Home Saver can benefit these types of borrowers, individual financial situations and goals may vary. It’s always advisable to consult with a financial advisor or mortgage consultant to understand the intricacies of this product and ensure it aligns with one’s financial strategy.

Things to Consider Before Choosing Citibank Home Saver Account

While Citibank Home Saver offers flexibility and the potential for substantial savings, it also requires careful management and a clear understanding of its structure and potential risks. Here are some risks and considerations you should keep in mind:

1. Interest rate fluctuations

The home loan interest rates for borrowers who have taken floating rate packages can fluctuate based on market conditions. These fluctuations can work for you or against you. If rates fall, your interest savings will increase. However, if rates rise, your monthly payments could increase significantly, potentially straining your budget. It’s important to have a contingency plan in place for these scenarios.

2. Balance Maintenance

For Citibank Home Saver to be truly effective, it is essential to maintain a substantial balance in the account. If you can’t do this consistently, you may not achieve the expected interest savings or reduction in loan tenure. Therefore, this product may be better for disciplined savers or those with regular surplus income.

3. Loan-to-Value (LTV) Ratio

The Monetary Authority of Singapore (MAS) sets the maximum LTV ratio. It is the maximum you can borrow based on the property’s value. If your deposits in the Home Saver account reduce your outstanding loan to an amount lower than the LTV limit, you may not see as much benefit from the interest offset feature.

4. Opportunity Cost

Although the Home Saver allows your savings to offset your mortgage and lower the interest payable, these funds are not being invested elsewhere for potentially higher returns. Depending on market conditions, the interest saved could be lower than potential earnings from other investments.

Final Thoughts

Citibank Home Saver is an innovative home loan product that, if used strategically, can bring a fresh approach to home financing. It offers significant savings on mortgage interest and a reduction in loan tenure.

Whether you’re a first-time buyer or an existing homeowner looking to optimise your financial strategy, the Citibank Home Saver might be the game-changer you need to make your dream of owning a home more affordable and sustainable.

At Dollarback Mortgage, we strive to guide you through the intricacies of home financing and achieve financial freedom faster. Have some mortgage-related questions or need independent advice on finding the best home loan rates in Singapore? Contact us today for a non-obligatory assessment and loan recommendations.

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