Offset Mortgage

A mortgage that allows you to link your mortgage and your savings together, this reduces the amount of interest you are charged

 The value of your savings is offset against how much you borrow on a mortgage loan, you are only charged interest on the amount left over

 The mortgage is a rate applied to a reduced amount covered by your savings, so naturally the interest will be lower

Let’s break it down:

If you have £15,000 in savings, and a £100,000 mortgage, you would pay interest on £85,000. The interest rate if set at 3% means you will pay £2,550 in interest per year.

Con: When you off set your savings, you are unable to earn interest

Pro: You do not pay tax on your savings when you offset your mortgage, beneficial for those in a higher tax bracket.

Who is suitable for an offset mortgage?

Let’s off set this mother!

Homeowners with savings, especially those in a high tax bracket. Or if you are a relation who wishes to help a first-time buyer, some lenders will allow you to offset your savings to help a friend, or relative to access a better mortgage rate.

Bring out the big guns!