An offset mortgage allows your savings to be set against your mortgage, reducing the interest you pay on the net balance. A savings account is set up alongside your mortgage, and the money in the account is ‘offset’ against the mortgage.
Offset mortgages can offer flexibility, tax efficiency, and help customers best use their income, for example,
- Clients with disposable income and ability to save.
- Self-employed with fluctuating income, or saving for a tax bill.
- Clients with bonus income, high savings or those likely to come into money.
- Entrepreneurs looking for flexible and fast access to capital for projects.
You will not earn any interest on your savings, but you will not be charged any interest on the corresponding amount of your mortgage either.
You can choose to use this saving to:
- Reduce the term of your mortgage
- Reduce your mortgage repayments
The great news is that you still have instant access to your savings for as long as you have your Offset mortgage.
For example, on a £1,000,000 mortgage loan you can reduce your mortgage term by 10 months, by having £40,000 in savings (based on a 3.49% term over 25 years). That’s without overpayments!
We often deal with customers with irregular income streams, i.e. those that are self-employed, shareholders or partners and directors. We can arrange deals with private banks and offset mortgage providers not available on the High Street, and there are no upper limits on offset mortgages.
Offset mortgages offer alternative to poor savings rates (this article originally appeared in the Financial Times on 26 March 2010)
Accessing your savings may increase your mortgage term or monthly mortgage repayments.