Offset Mortgage

Making Them Work For You

The best offset mortgage can make the difference of years in helping reduce your mortgage by utilising savings without having it locked away within the mortgage itself.

Features;
Lender provides a current account or savings account
complete with normal debit card,
cheque book
internet access.

The difference is that they pay ZERO interest on any savings in that account but offset that balance against the mortgage balance.
Therefore only pay interest on the lower mortgage balance, saving significant interest over the life of the loan.

Example;
Mortgage Balance £100,000
Savings £3,000
Mortgage Interest charged on £97,000

Theoretically, this can save thousands over the life of the mortgage. The key to these mortgages is in the fine print. Think of it this way. If you & your partner bring home £2,500 per month then that would be offset against your mortgage.

Beware
The reality is that many of these accounts only offset the lowest balance of the month. If you’re like most people who get to the end of the month and have little left by the end, then the true benefit is negligible and there are often cheaper rate loans available without the feature

What to look for in the best offset account…
The main thing you’re looking for is an account that offsets the full balance of the current account on a daily basis. This way, every day you retain funds in your account, it helps offset interest.

Food for thought…
If you manage to save say £100 per month into your offset account, which is the average goal of most people, there should be £1,200 at the end of the year. Logical.

Fast-forward 5 years... There should now be £6,000 that you haven’t touched in your current account. If you can honestly say the temptation for a new kitchen, holiday or car, wouldn’t be too much then proceed to application. Not only that, but if you know that you can save £100/mth use the term goal calculator to work out how much that would save you.

If the temptation to spend is too great with an Offset Mortgage then a full Current Account Mortgage (“Australian Style” mortgage) may be a better option as the money is actually paid of the mortgage.

Look at the other mortgage loan types to ensure that this really does suit your goals and psychology.

Make sure to read through the details of an offset mortgage again to be sure you understand what you're looking for and how to maximise your savings.

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