Offset Mortgage

What is an offset mortgage?

Basically an offset mortgage is one where you can combine your mortgage debt with the contents of other accounts such as current account and savings accounts and reduce the interest you pay on your mortgage by offsetting your credit balance against your mortgage debt. For example if you owe £100,000 on your mortgage, have £3,000 in your current account and have £17,000 in savings then you will only pay interest on the net balance of £80,000.

Benefits of having an offset mortgage

One of the advantages of an offset mortgage is that it can save you paying some tax. Any interest accrued on deposit accounts is seen as income by the Inland Revenue and will be taxed at a rate of 20%. However as your accounts will be combined with your mortgage debt in an offset mortgage package the notional credit balance won’t generate income and you can’t pay tax on zero income. You will save by paying less interest on the mortgage amount owing and the fact that mortgage interest rates are likely to be higher than the interest rates on your savings accounts and particularly your current account, if you have any interest at all, is an extra benefit.

A further advantage of taking out an offset mortgage is the flexibility it affords. It is possible to pay your mortgage off early, particularly if you have constantly had high amounts in your savings accounts and conversely an offset mortgage allows you to take mortgage ‘holidays’ and so would suit self employed people whose income fluctuates on a monthly basis and also would suit those with fluctuating expenditure.

Disadvantages of having an offset mortgage

The main disadvantage of an offset mortgage is the need to have reasonable amounts in your savings accounts. The more you have saved the more you will save in interest paid on the amount outstanding on your offset mortgage and this sort of mortgage will suite the disciplined saver.

Summary

An offset mortgage would suit the disciplined saver with higher amounts in their savings accounts and would also benefit those who have fluctuating monthly income or expenditure.

Arranging an offset mortgage can be a complicated process but we have expert mortgage advisers who help you.

Fill out the offset mortgage online enquiry form and one of our mortgage advisers will contact you.

 

 

 


 

Commercial Mortgages and Buy to let mortgages are not typically regulated by the FSA

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

We do not charge a fee for mortgage advice. A fee based option is available of typically 2% of the mortgage amount.
For example on a loan of £25,000 the fee would be £500



Contact Us | Terms & Conditions | Privacy Statement | Sitemap