MortgageOne Standard Chartered : Review of SCB MOA

Standard Charterted’s MortgageOne Account (MOA), exemplifies how Standard Chartered, fondly known as StanChart, consistently pushes the envelope in providing smart, efficient, and cost-saving solutions for its retail clients.

This article discusses Standard Chartered’s MortgageOne in detail. All homebuyers must thoroughly understand its features and potential implications before deciding if it is the right pick for them.

What is Standard Chartered MortgageOne?

SCB MortgageOne is an all-in-one interest offset mortgage account in Singapore. This innovative package combines your mortgage loan and savings or current accounts into one unified account, thus offering a more flexible way to finance your new home purchase.

In a conventional home loan scenario, borrowers pay interest on the entire mortgage loan amount outstanding.

But with Standard Chartered MortgageOne, clients pay interest only on the difference between the actual mortgage loan amount and the funds held in the savings account linked to the MortgageOne account. The savings deposit in your account reduces – or offsets – the interest you pay on your home loan, providing a quick and easy way to reduce your mortgage loan interest.

Let’s visualise this with an example. Suppose you have a StanChart MortgageOne account with a home loan of $600,000.

And you have a balance deposit of $100,000 in your linked savings account. In a typical home loan scenario, you calculate the interest charges on the full home loan amount, i.e. $600,000. However, with MortgageOne, the interest charges are calculated at $500,000 (i.e., $600,000 minus $100,000). As a result, you pay less in interest costs, leading to significant savings for the loan tenure.

MortgageOne can also be a way for Standard Chartered to mitigate default risks when lending to homebuyers. With the borrower’s extra cash deposited in the bank, SCB is at reduced risk and can feel safe that the borrower isn’t under any dire financial stress that might lead to delinquency and defaults in future.

Having one unified account simplifies banking operations and helps homeowners save thousands of dollars on mortgage interest. It can also knock a few months or years off their loan tenure.

How does SCB MortgageOne work?

To appreciate the innovative design of Standard Chartered’s MortgageOne Account, one needs to comprehend how it works. This section explains how this unique home loan product works while demonstrating its potential to save on interest payments.

Instead of treating your home loan and savings account as separate entities, MortgageOne combines them into one. The total balance in your linked savings account offsets the outstanding home loan amount on a daily basis, resulting in reduced interest charges. However, a catch is that the interest rate earned does not apply to the entire sum you have in the account – but only to a certain fraction of it.

With SCB MortgageOne, two-thirds (2/3) or approximately 67% of the amount deposited in the MortgageOne account enjoys the same interest rate as charged to your housing loan. This amount offsets the interest on monthly home loan payments. The remaining one-third (1/3) deposit earns the bank’s prevailing interest rate, which is currently 0.25%.

The interest rate is subject to a maximum outstanding home loan principal amount.

Let’s take an example to understand it better.

	With SCB MortgageOne
Total Loan Quantum	$750,000
Interest Rate Charged for Loan	4%
Loan Payment Interest Per Year	$30,000
Amount Deposited	$210,000
Interest Offset Per Year	2/3 of deposit enjoys 4% = $5,600
	1/3 of deposit enjoys 0.25% = $175
	Total interest earned per year = $5,775
Loan Payment Interest ($30,000) – Total Interest Earned ($5,775) = Net Loan Interest Payable ($24,225)

Note: This is a simplified example for illustration purposes only.

This benefit is twofold: not only do you save on interest payments, but by effectively reducing your loan amount, you might also be able to pay off your home loan sooner.

Since a large portion of your monthly home loan instalments contributes to paying down your loan amount, your loan tenure will be shortened. It’s like hitting two birds with one stone – you save on interest and shorten your mortgage loan tenure!

Features of SCB MortgageOne

Interest Offset

At the core of MortgageOne’s appeal is its unique interest offset feature. This feature allows the interest earned on the balance deposits in your linked savings or current account (with SCB) to offset the interest payable on your home loan. You offset your savings against your mortgage, so you only pay interest on the balance.

Flexibility

The unique proposition of the MortgageOne product doesn’t stop at interest offsetting. It also provides much-needed flexibility in the often rigid landscape of home loans. The product allows you to make extra repayments without any penalties.

Sometimes, you might receive extra money – a bonus, an inheritance, or any unexpected windfall. With MortgageOne, you have the option to channel this ‘extra’ money to reduce the interest expense of your mortgage compared to making a lump sum payment and paying off your mortgage early. It reduces your outstanding home loan amount and saves even more on interest costs.

By capitalising on these features, borrowers can manage their finances more efficiently, reduce interest costs, and potentially repay their home loans faster.

What is the eligibility for Standard Chartered MortgageOne?

While MortgageOne offers borrower-friendly features, potential borrowers must meet the eligibility criteria to avail of this product. The eligibility for MortgageOne, like most financial products, depends on several factors, which includes age, income stability, and citizenship status.

• Age: At the time of application, the borrower must be at least 21 years.
• Income stability: Since the borrower’s income demonstrates their capacity to service the loan, Standard Chartered considers the borrower’s income, employment stability, existing financial obligations, and credit history to assess the borrower’s creditworthiness.
• Citizenship status: All Singapore Citizens (SCs), Singapore Permanent Residents (SPRs), and foreigners with a valid employment pass are eligible for MortgageOne.

Note that SCB MortgageOne Account only applies to private residential properties and loan amounts of a minimum $100,000.

Review of SCB MortgageOne

Advantages of Standard Chartered MortgageOne package

Reduced Interest Rate

When opting for the MortgageOne SORA floating rate package, one of the main advantages is the potential to reduce the effective interest rate. Depositing a portion of the outstanding home loan can lower your monthly mortgage interest.

It is especially beneficial in a rising interest rate environment when your idle funds in other deposit accounts are earning minimal interest. Choosing a floating rate mortgage package with an interest-offset feature like MortgageOne SORA allows borrowers to reduce their daily interest costs and give them more savings even during the lock-in period.

Essentially, the funds deposited act as a blended deposit, earning a lower interest rate than the home loan mortgage rate while effectively reducing the outstanding loan amount.

Faster Loan Repayment

The reduced interest savings can have a ripple effect that potentially reduces your loan tenure. A larger portion of your home loan repayment is then directed towards repaying the principal amount and less towards the interest portion. It helps to speed up the repayments of your home loan. Note that your monthly repayments amount remain the same.

One Account for All

Since SCB’s MortgageOne account integrates your home loan and savings accounts into one, it reduces the hassle of maintaining multiple accounts. No more transferring of funds from one account to another is required to service your housing loan.

Greater Flexibility

Since MortgageOne is essentially a savings account, it allows you the flexibility to withdraw any amount at any time when needed. The withdrawal process is hassle-free and requires no notices or incurs penalty charges. Also, there is no requirement for a minimum deposit amount or to keep the funds for a specified duration in the account under MortgageOne.

Disadvantages of SCB MortgageOne

While MortgageOne has an array of potential benefits, it is essential to understand and consider the inherent risks and challenges this product might pose. As the adage goes, “There’s no such thing as a free lunch”, and it rings true even with innovative financial products like MortgageOne.

Interest rate changes

Depending on the interest rate type (mortgage board rate or floating rate) of your home loan mortgage, changes in interest rates will directly impact your interest payments. While there is a possibility of lower rates during favourable market conditions, you may be subject to high rates when market conditions change.

Thus, a rise in interest rates to which your home loan is pegged to will translate into higher interest costs, leading to increased monthly repayments.

Might affect cash flow

If you are an entrepreneur or small business owner, you must consider how MortgageOne might impact your cash flow. As funds deposited in the linked savings accounts are automatically used to offset the loan, it could tie up cash that might otherwise be available for business expenses.

Before choosing Standard Chartered MortgageOne, borrowers should carefully consider their financial situation and consult financial advisors to make informed decisions.

Who would benefit from MortgageOne?

MortgageOne offers unique benefits that make it particularly advantageous for individuals with stable incomes and substantial savings or spare cash to park in their accounts.

Some individuals may prefer the MortgageOne package over putting their extra funds in a fixed deposit account due to its flexibility.

While a fixed deposit offers a fixed interest rate and a specified lock-in period, MortgageOne allows borrowers to maintain liquidity and have their cash readily available during emergencies. It can be especially appealing for those who prefer to have their savings easily accessible for various purposes or unforeseen expenses.

Moreover, individuals with surplus income (bonuses or dividends) can also benefit from MortgageOne. They can utilise their extra funds to make additional mortgage repayments without penalties. By doing so, they can effectively reduce both the interest cost and the loan tenure, ultimately saving money in the long run.

Additionally, some individuals may keep their spare cash in an interest-offset account like MortgageOne instead of other investment options or use it to finance their property. The reason behind this decision can be the desire to have their cash savings close at hand rather than locked up in the stock market or tied to their property investment.

Furthermore, considering the prevailing low interest rates on normal savings accounts, MortgageOne account offers the potential for better returns on their spare cash. The offset mechanism effectively reduces the interest payable on your mortgage while maintaining the accessibility of funds for emergencies or unforeseen circumstances.

However, MortgageOne may not be suitable for everyone as it requires financial discipline. Like any financial product, the decision to utilise MortgageOne should be based on careful consideration of personal financial goals, liquidity needs, and the potential benefits of offsetting mortgage interest.

Final Thoughts

Standard Chartered MortgageOne, with its host of borrower-friendly features, provides a unique and potentially beneficial approach to home financing. MortgageOne offers a lower net effective interest rate and flexibility in managing funds.

But prospective borrowers must understand the inherent risks and requirements of MortgageOne account as it goes beyond the one-size-fits-all approach. Potential advantages of SCB’s MortgageOne need to be weighed against its risks and considerations to determine if they align with individual financial circumstances, goals, and risk tolerance.

At Dollarback Mortgage, our expert mortgage consultants can help you make informed decisions that align with your financial goals and circumstances.