A guide to offset mortgages
An offset mortgage is where you link your mortgage to your savings account in order to reduce the amount of interest your lender charges you. Your savings are placed in a regular account such as a current account (with the same lender that is providing your mortgage), and the lender takes away this amount from the overall mortgage balance so that you only pay interest on the remaining amount. For example, if you had a £200,000 mortgage and you had £20,000 in savings, your lender would only charge you interest on the remaining £180,000.
With an offset mortgage, you can still withdraw cash from your savings account at any time, or pay more money into it. If you pay more money in, the amount of interest you pay will continue to fall. If you withdraw money, the amount of interest you’ll need to pay will rise. Many lenders also let borrowers make overpayments on an offset mortgage, which also enables them to reduce the overall amount of interest they are charged. You can combine your current account or a friend’s or family member’s savings account with your offset mortgage. This will all help to reduce the amount of interest you are paying overall. You can withdraw savings at any time.
What are the benefits of an offset mortgage?
There are many positives to taking out an offset mortgage, including:
- Great savings made on mortgage interest.
- If you are self-employed, you can use the money you put away for a tax bill into an account where it can contribute towards lowering your mortgage interest until you need to pay the tax man.
- More tax efficiency for high-rate taxpayers.
- Offset mortgages have no restrictions on overpayments, helping you reduce your overall mortgage balance and interest.
If you are interested in discovering lenders that offer offset mortgages, get in touch with us today at iam Mortgages. Our helpful team of mortgage advisors will ask you about your current circumstances and compare the market to find the best offset mortgage deal available that suits your needs. Give us a call or fill in our online form and we will get back to you.