What is an Offset Mortgage?
This is a mortgage that is completely flexible and allows the borrower to reduce interest charged on their outstanding mortgage balance, by offsetting it against any credit balance they have in their savings or current account.
An offset mortgage is a very simple concept in reality. It works on the basis that for the calculation and charging of interest, any savings you hold with that bank, you will not be charged interest on the equivalent amount on your mortgage.
This is an example to illustrate how an offset mortgage works:
Imagine you have an offset mortgage of a £100,000, and you had an offset savings account linked to the mortgage with £30,000 saved in it. For the purpose of calculating interest the £30,000 savings is offset against the £100,000 mortgage, so in effect you will only be charged interest on £70,000 of your mortgage borrowing.
In most cases, you have instant access to your savings, so this is extremely flexible in terms of having access to your money as and when needed.
The savings made from the offset savings can be used to either reduce the mortgage term for you, or reduce your monthly mortgage payments.
Why use a Broker for Offset Mortgages?
These mortgages not suitable for everyone, but they can be exceptionally good for people who hold a lot of cash savings for any period of time, or self-employed people who save regularly for tax purposes etc.
For the aforementioned reasons, it is therefore essential to speak to someone who can advise you on the most appropriate solution to suit your individual needs. Our mortgage brokers at JF Financial Associates are on hand to do just that! With years of experience behind them, there is no one in a better position to provide you with the impartial advice, allowing you to make an informed decision.