Money on deposit accounts is less worthwhile.
This is BSU
The BSU is an abbreviation for Housing Savings for Young People and is a particularly beneficial savings scheme that you can use until you reach 34 years.
It’s beneficial because you provide tax deductions in addition to a good interest rate on your savings.
The premise is that you spend the money on housing, either purchase of housing or repayment of housing loans purchased after you create your BSU account.
The aim is for young people to get started with housing savings and that this will be a beneficial saving form, which will help to the housing market. The authorities have decided that it will be worth saving for housing.
You can save up to 25,000 kroner each year – a total of 200,000 kroner and receive a tax deduction of 20% of the savings amount, ie up to 5,000 kroner each year.
Figures from Finance Norway show that approximately six out of ten with housing needs use BSU, and Norwegians have a total of around NOK 35 billion standing on BSU accounts.
Source: Consumer Economist in Storebrand Kristina Picard
The BSU is smart savings, there is no doubt. But, did you know that at the moment BSU is about the only bank savings that pays off?
– BSU has always been a good product, especially because of the tax deductions. The reason that it is now very different is that it is about the only bank savings that pays off, “says economist Kristina Picard in Storebrand.
The reason for this is, among other things, that savings rates on ordinary deposit accounts are now record low due to the generally falling interest rates.
This makes the good BSU rates and tax benefits extra valuable, says Rolf Mæhle, Head of Finance Norway..
At the same time prices around us rise by more than two percent. In addition, you pay 27 percent of all interest income.
– All in all, your money becomes less valuable when they are in the bank. The BSU customers are in a special position because they get good interest and deductions on taxes, says Picard.
The benefits of saving in BSU
Having a BSU account gives you many more benefits than the one mentioned above. Mæhle points to three.
– Firstly, the higher the equity, the lower the risk in relation to possible falling house prices and the increased borrowing rate. Secondly, the tax advantage is significant. At annual savings of 25. 000 kroner, in fact, pays the state 5,000 kroner via the tax deduction, he says and continues:
– Third, banks offer scanty interest on BSU because this is long-term savings from attractive customers.
Another good reason for BSU’s superlighter to get started now is that the authorities and banks are concerned that home buyers have sufficient equity, usually measured against a norm of 15 percent.
– Without equity, the way into the housing market is long and heavy for most, says Mæhle.
– Savings in BSU ensure that you save equity for your first home, and equity is too many only ways to get a mortgage, says Picard.
She adds that in order to benefit from the tax deduction, you must have taxable income.
– For 2015, you may earn more than about 70. 000 kroner to get the deduction, but you’ll get the interest anyway.
Preferably set all in January
For many, perhaps December is the best month to deposit money on the BSU account, given Christmas gifts in the form of BSU deposits or money from parents and grandparents and half taxes.
However, to get the full effect of the interest rate you should deposit the full amount of 25. 000 kroner in January.
Understandably, not everybody has the money to fill up the account, so the second is best to put over a bit every month to avoid the big bang in December.
– Nest is best to insert a little each month. Then you get more in interest income while leaving a big and bad “skipper roof” at the end of the year, Picard says in Storebrand adding:
– Make a regular move to BSU on the day that money is taken into account, so do not make it hurt in December.
If you still have a BSU skipper roof in December, you should be aware of the benefits you missed as you had been getting even savings throughout the year.
– With today’s interest rates, you lose between 1000 and 1100 kroner before tax to deposit everything in December instead of January, given that you deposit 25. 000 kroner, which is the maximum annual savings amount, says Picard and continues:
– Do you save just over $ 2,000 a month instead of inserting everything in December, you have about $ 700 more before tax.
Feel free to use other capital first
The requirement for BSU is that you spend the money on housing, either purchase of housing or repayment of housing loans purchased after you created your BSU account.
Nevertheless, many banks often recommend not using BSU for housing purchases, and let the account be whether home buyers have the opportunity for this. But why?
– Maximum amount of credits on BSU is 200. NOK 000, plus interest. If a mortgage customer has another equity and has not reached the BSU ceiling, it is smart to continue the BSU savings and reap the annual tax deduction plus the high interest rate, says Mæhle, and continues:
– The return on BSU, consisting of interest rates plus tax deductions, is higher than the borrowing rate, so it pays to continue the BSU savings if possible.
Picard says that the rules open for you to continue saving in BSU even if you have purchased your first home – as long as the account was opened before you purchased the property.
Because of the tax deduction and the good interest rates, it may be worthwhile to continue with BSU savings and use other means of housing purchases if one can afford it, she says, adding an important point:
– But it’s no shame to bounce your BSU account when buying a home, that’s what’s the purpose of it.