Offset Mortgages

Offset mortgages link with your other finances to save you money

In a Nutshell...

• Offset mortgages link your mortgage to your current account and savings, which reduce the debt you pay interest on.
• They have flexible features, such as the ability to over and underpay.
• As you don't actually receive any interest on your savings you don't pay tax on them.
• They're suitable for people who are good at controlling their finances.

What is it?

With an offset mortgage, all your finances are linked, so the same lender holds your current account, mortgage, savings and maybe even credit cards and personal loans. They have the features of standard flexible mortgages, such as over and underpayment facilities. As with all flexible products, you need to be good at controlling and understanding your finances to make full use of the features on offer.

Benefits

Any accounts in credit are offset against your debts, so instead of being paid interest on your savings and current account, you don't pay interest on the equivalent amount of your mortgage debt. If, for example, you have a mortgage of £80,000, by having £1,000 in your current account and £7,000 of savings and offsetting these against your mortgage, you only pay interest on the remaining £72,000.

• Daily interest adjustment: As with flexibles, your interest is adjusted daily, your current account and savings are effectively helping to reduce your mortgage every day. You pay less because the interest on your mortgage is reduced, which shortens your mortgage term or reduces your monthly payments.
• Tax advantages: You can make substantial tax savings. As you don't receive any interest on your savings, you don't have to pay tax on them. This appears as an interesting option for higher rate taxpayers in particular.
• Capital repayments: As long as you cover the interest due on the mortgage each month, you should have the flexibility to repay the mortgage however you want.

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