An offset mortgage is a fully flexible mortgage which allows a borrower to keep balances in a linked account to reduce the interest payable on their mortgage balance.
An offset mortgage links your bank account balances to your mortgage in order to reduce the mortgage balance you’re charged interest on.
Money in linked account(s) is set against the mortgage balance and interest is only charged on the outstanding amount, meaning interest payments are lowered or alternatively, depending on the lender, the term of your mortgage could be reduced.
How they work
The principle is simple: by depositing your savings or having your everyday current account with the lender the balances in these accounts can be used to reduce the overall interest paid on the mortgage, whilst keeping the money accessible.
Many offset lenders calculate interest daily, meaning every day your savings are reducing the cost of your borrowing. Additionally, by utilising your savings to offset your mortgage interest you avoid paying tax on interest that savings deposits would normally attract. Some lenders have the facility for multiple accounts (such as current account, savings and ISA’s) but for the purposes of interest calculation, all balances are accumulated.
Flexible deals in many cases allow you to make extra lump sum or monthly payments, take payment holidays and make underpayments.
Will You Benefit From An Offset Mortgage?
Offset & Flexible mortgages suit certain type of clients but they can often have slightly higher interest rates or fees so it is essential to compare the scheme against a mainstream product to ensure the benefits and savings really do work for you.
With more and more lenders operating in the offset and flexible market, all offering different features on their products in competition with the each other it is crucial that a comprehensive comparison is made. With instant access to over 12,000 mortgages and over 90 lenders, we can compare products at the touch of a button thereby ensuring that you are getting the most suitable advice and the correct deal to suit your individual circumstances.
Our quotations and illustrations are completely free so you have nothing to lose and much to gain by contacting us to find out what we have to offer.