Offset Mortgages

Offset mortgages allow you to link a current and/or savings accounts to your mortgage. The value of your savings is then subtracted from the amount you pay interest on to reduce your monthly payments and less overall interest charged. Offset home loans will not earn interest on your savings, however as people usually pay more interest on a mortgage than they earn from a savings account, this type of mortgage could still save you money.

Over a full mortgage term, offset mortgage rates could save you large sums in mortgage interest payments. Usually your capital repayments will still be based on the full loan amount as the offset arrangement only reduces the amount you are required to pay interest on and not the loan itself which must still be repaid in full, however in some instances a reduced payment could be taken instead.

Below you will find some more common features which may come with an offset rate mortgage:

• Interest Calculated Daily
• Underpayments
• Overpayments
• Payment Holidays
• Flexible Mortgage Savings Account
• Switching

Offset Mortgage Rates

Offset mortgage repayments do not affect the actual value of your savings, as they are placed in an interest-free savings account and their value is then offset against your mortgage. You can still withdraw money from your savings with an offset account, however if you do then you will no benefit from the same amount of ‘offsetting’.

Although this scheme has its benefits it can be complicated and difficult to keep track of your full payment schedule. So, you should carefully consider whether it is suitable for you before taking out an offset mortgage.

Currently Offset mortgages are available with different rate types:

• Offset Repayment Mortgages
• Flexible Offset Variable Rate Mortgages
• Flexible Offset Fixed Rate Mortgages
• Flexible Offset Tracker Mortgages

If you would like to find out more information concerning flexible offset mortgages, get in touch with us here at Stuart Brown Mortgage Services to speak to one of our mortgage brokers.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.

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FAQs

How do offset mortgages work?

An offset mortgage works by linking to one of your savings accounts. The money in your savings account is used to lower the total interest on each month’s repayments. This can either help reduce your mortgage repayments or mean that more of the mortgage payment is used as capital coming off the debt.

However it does mean that any savings in the ‘offset’ savings account won’t earn any interest.

Who are offset mortgages good for?

Offset mortgages are great for people who have large savings (or the ability to save larger sums monthly) that they won’t need to use for other things.

As interest is not received on the savings balance (as it simply reduces the interest payable on the linked mortgage) there could also be benefits to higher rate taxpayers.

What types of offset mortgages are there?

There are two types of offset mortgages, fixed rate and variable rate (this could be a discounted rate or tracker scheme). A fixed rate mortgage means the interest rate is fixed for a set period of time. Whereas, a variable rate mortgage means the interest rate (and payment) can go up or down.