Offset Mortgage

What is an Offset Mortgage?

An offset mortgage is a relatively new invention. The main idea is that you can combine all your borrowings (including other debts to mortgages) with all your savings (including what is in your current account).

The offset mortgage concept treats your money as one giant pot, with each element (mortgage, savings, current account etc) separate to the rest. The result is basically a giant overdraft, although it behaves differently.

The driving concept behind an offset mortgage is that you can use your savings to cancel out (or offset) part of your borrowings (or mortgage). This should result in you paying less interest on your borrowings. Under an offset mortgage you should therefore be able to either pay less each month, or to reduce the term of your mortgage.

The beauty of the offsetting feature is that you can always have access to your savings if you need them. So you can make them work to pay off your mortgage, and access them when you need to.

The downside is that you will not receive any interest on your savings, but neither will you be taxed on it.

Another downside of an offset mortgage is that you do pay for this flexibility in some ways. For example, generally you will be tracking the base interest rate. This means that you will not be able to obtain a fixed rate offset mortgage. The rate on an offset mortgage will be higher than the cheapest rates available. In order to benefit from the offset you will typically need £5000 to £8000 in savings.

Click here to contact us about an offset mortgage.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.