Offset mortgages are like the rockstars of the mortgage world, offering a twist on the typical setup with a little extra flair. Essentially, they work like standard mortgages but with a unique advantage: they allow you to use your savings to reduce the interest on your mortgage.
How Offset Mortgages Work ⚙️
With an offset mortgage, you’ll choose between a fixed or variable rate like normal. However, your lender will also set up a savings account linked to your mortgage. The balance in this account is used to offset the interest you’d pay on your mortgage.
Example: Johnny has a £125,000 mortgage but also has £25,000 in savings. By placing this £25,000 in his offset account, he doesn’t pay interest on that portion of his mortgage—meaning he only pays interest on £100,000. Johnny still has full access to his savings and can withdraw them anytime, with the mortgage interest recalculated accordingly.
Two Key Benefits 🎯
Reduced Term: If you leave your monthly mortgage payments as they are, the offset feature will help you overpay each month, reducing the overall term of your mortgage.
Lower Monthly Payments: Alternatively, some lenders allow you to lower your monthly payments by offsetting, rather than shortening the term.
Let’s get started…
Enter your details below and we will be in touch.
The Cost Factor 💸
Offset mortgages often come with slightly higher interest rates than standard mortgages. But that’s not necessarily a bad thing—if you have savings sitting unused, you can save more money on interest in the long run.
Remember This: The interest rate is only one part of a mortgage deal. If you have savings, an offset mortgage could still save you money, even with a higher rate.
Final Thoughts On Offset Mortgages🤔
While offset mortgages may seem complex, they offer real flexibility for those with savings. Whether you want to reduce your mortgage term or lower your payments, they can be a powerful financial tool tailored to your situation.
