What is an offset mortgage?
An offset mortgage is a mortgage whereby your savings are used to reduce the amount of interest you pay on your mortgage.
An offset mortgage works by linking a savings account to your offset mortgage.
Interest is charged on the difference between your mortgage capital balance and the offset savings account. The more you deposit in the savings account the less in interest you have to pay. You can withdraw the funds from your savings account at any time as there is no lock in period. This will of course increase your interest payments.
The funds in the linked account can be deposited by friends of family.
An offset mortgage can help you;
- Pay your mortgage off quicker
- Reduce your monthly payments now or in the future
Is an offset mortgage right for you?
An offset mortgage will not pay you interest on your savings and should really only be used when interest rate earnings on your savings will be less than the interest rate repayments you will have to make on your mortgage in the same time period.
You can get a fixed offset mortgage or a tracker rate.
You can repay the offset mortgage at any time but the same early repayment charges may apply.
An offset mortgage can be incredibly cheaper way to get on the property ladder and allow you to pay off your mortgage quickly