Offset mortgages, a great mortgage option which is often one of the most overlooked mortgages options nowadays – but were one of the most popular options available in the 1990s. The reason for this is because people aren’t as good as savings as they used to be. However, if you do feel that saving is something that you’re able to accomplish each month then this type of mortgage may be a good route to go down.
When looking into how offset mortgages work, when you choose to set one up with a Lender, you are given a savings account as well. The Savings account which is set up is one linked to your mortgage. The account may not offer you any interest on your savings but is instead put into place to ‘offset’ against your mortgage balance. For example, if you owe £100,000 on your mortgage and your Savings Account holds £18,000 then you only pay interest on £82,000.
Offset mortgages are one of the most flexible arrangements in terms of Mortgage options. You are able to deposit as much money as you wish until the mortgage is completely ‘offset’, whilst you still have instant access to use whenever you wish.
Due to the fact that the Savings Account doesn’t collect interest as it is connected to your mortgage, also means that there is no tax to pay on anything that is held within it. Which can be handy if you’re a Higher Rate Taxpayer.
There are negative factors involved, as there are with all mortgage options. Offset Mortgages do tend to have slightly interest rates and fees than other alternative options. So, if you aren’t going to make use of the flexible features then a standard mortgage may be a more suitable option.
If you think that you are receiving a lump sum for a particular reason in the upcoming future such as an inheritance, an offset saver would be an appropriate place to deposit the money until you decide on what you will do with it. The same can be said for if you receive annual or quarterly bonuses in your job that you do not rely on.
Consumers who choose to go with Offset Mortgages tend to stick with them and are less likely to go through with Remortgaging. These can be tricky to understand sometimes so when you speak with a Mortgage Advisor make sure to consider all options available before making a choice, as they will go through how an Offset Mortgage may help you in the long run.
A lot of consumers who obtain a mortgage plan to overpay their mortgages but never get around to doing it. This is sometimes because they are nervous about paying too much off their mortgage which could have an adverse effect on their future capital requirements. Once more, Offsets are a great solution for this type of borrower as you’re able to access the money at anytime but each day the savings remain in your account – it’s working in your favour.
Our advisors will be able to show you the impact of how an Offset can save you money over the course of the full term. If you have any questions about Offset Mortgages or Remortgages, please get in touch and we’ll be happy to discuss the topic further.