Offset mortgages are a relatively new sector of the mortgage market, and one that is growing all the time. A mortgage of this type offsets the amount of interest you pay on your house by considering the money you have in savings accounts and current accounts.
The more money you have, the less interest on your mortgage you pay.
In theory this means that you can repay your loan faster and cheaper. Generally, you do not receive any interest on your funds in return for this deal. Current base rates are low, meaning that savings rates are generally poor. Choosing to use the money to reduce your mortgage payments can be a more sensible financial option. Furthermore, all credit card debt, personal loans and further debt can be incorporated into the nest of products, possibly leading to a lower repayment rate. These debts can also remain unsecured – not linked to your home. This turns short-term debt into long-term debt, however, and may not always be the best financial solution.
Do I suit an offset mortgage?
The size of the offset mortgage market is growing all the time, and accounts for a significant proportion of new mortgage approvals. Generally those people who suit offset mortgages have large and volatile incomes (bonuses or successful self-employed) or have significant savings amounts.
I have small/no savings, could an offset mortgage still be suitable?
Paying your regular salary into your current account and using this to offset against your mortgage could still save you money on repayments. The amount will vary, but it will still go some way to reducing mortgage repayment. Having an offset mortgage doesn’t make any difference to how the account operates, providing you with just the same access to funds.
What are the benefits?
Offset mortgages are now available as single or joint accounts and allow you to offset current accounts, savings and ISAs. Some will allow you to overpay when you are financially healthy.
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