Offset Mortgage Advice
An offset mortgage is a type of mortgage where your savings held within a linked bank account are subtracted from the amount of mortgage you pay interest on, essentially meaning that you either pay off your mortgage more quickly or pay less each month.
Offset mortgages let you link your current or savings account to the mortgage, which offsets the total balances of the linked bank accounts against the amount owed on the mortgage. This means that the mortgage can have a lower interest rate as the lender works it out against the lowered balance. However, this normally means that you won’t earn interest on the current or savings account linked to the mortgage.
An offset mortgage can help you save money
Using an offset mortgage can help lower your monthly payments, or reduce the length of the mortgage term. An offset mortgage differs from a standard mortgage, where your interest payments are based on the total amount you owe, this means that by using an offset mortgage, you could save thousands of pounds in interest payments, as the amount of the mortgage you pay interest on is reduced and offset by your savings.
Capital repayments are still based on the full loan amount of the mortgage, as the offset arrangement only reduces the amount you need to pay interest on, rather than the loan itself. Typically, offset mortgages will come with a slightly higher interest rate which could potentially undo some of the benefits, if, for example, you only have a relatively small amount of savings – your best option might be to search for the best low-rate mortgage product available to you.
Accessing savings with an offset mortgage
By choosing an offset mortgage, you can reap one of the biggest benefits they offer; being able to access the cash in your savings when you need it. Although some lenders do require you to keep a minimum balance, accessing your money this way rather than remortgaging is far quicker and easier.
However, any money you do withdraw from your savings will no longer offset your mortgage, and so, your monthly repayments will go up as the percentage of mortgage you pay interest-free is reduced. Offset mortgages are best suited to savings or current accounts with a good relative amount, if you have the linked accounts that are empty for long periods of time, it may be best to consider switching to a different type of mortgage.
Offset mortgages are tax-efficient
Offset mortgages can be a tax-efficient way to use your savings, especially for higher-rate and additional-rate taxpayers. As you won’t pay tax on any savings income or use personal savings allowance because you won’t be earning interest on your banked cash.
Essentially, your savings will be generating a return, by bringing down your mortgage interest payments, but without the tax bill.
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Is an offset mortgage right for you?
Depending on your exact financial circumstances, current mortgage payments and amount of savings, it can be tricky to work out if a commercial mortgage is the right financial choice for you. If you find that the current or savings bank account you would link to your mortgage is often low in relativity to the amount borrowed or even run empty, then it might be best to evaluate the other options you have in order to find the lowest-interest mortgage for you.
If you are stuck on deciding if an offset mortgage is the best option for you, discover our specialist offset mortgage broker service and receive the exact consultation you need in order to make the best possible financial decision for your mortgage.
We offer dependable financial advice about offset mortgages
If you are unsure whether an offset mortgage is the right financial choice for you, discover our specialist offset mortgage advice service. Our friendly team have decades of experience offering bespoke advice about a huge range of financial services.
It can be tricky to work out if an offset mortgage will save you any money in the long run. Our expert offset mortgage consultants take into the full scope of your personal financial circumstances to evaluate your needs and options – advising you on the best possible product to take out and ensure you are not paying any more than needed on your mortgage.
We have been using RH for the past few years now and wouldn’t want to use anyone else. The service is second to none, always friendly, polite and very professional.
– Mrs. S
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