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Offset Mortgages Put Simply

The idea behind an offset mortgage is simple and straightforward. By linking your mortgage and your savings, you can bring down the cost of your loan. This is because rather than earning interest, your savings reduce the amount of interest you pay on your mortgage. In other words, the more you save, the less interest you’ll pay on your mortgage.

 

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The key benefits of an Offset Mortgage

  • Choose to reduce your monthly payments
  • Choose to pay off your mortgage sooner
  • Link multiple offset savings accounts (subject to lender)
  • Make overpayments whenever you like without incurring an Early Repayment Charge (subject to selecting a no ERC product at outset)
  • Make underpayments (with your lenders agreement)
  • Benefit from great equivalent savings rates on your savings

How your mortgage and savings are combined

Your offset mortgage account and your offset savings account remain separate, it’s just that they’re linked. This means that as well as having access to your savings, you benefit by only paying interest on the difference between the amount in your savings and your mortgage amount.

How offset mortgage benefits work

Choose ONE of the three benefit options below before your mortgage starts. You can easily change your mind at any time in the future.

Option 1:
Reduce Current Payments
Benefit from lower payments now,
but keep the mortgage term the same
Option 2:
Reduce Payments In The Future
Benefit from lower payments at each
annual review, but keep the same
mortgage term
Option 3:
Reduce Term
Benefit from paying off the mortgage
quicker, but keep your monthly
payments the same

Understanding the equivalent savings rate

The money in your offset savings account benefits from the equivalent rate that you are being charged on your offset mortgage. You don’t earn any interest on your savings, but you only have to pay interest on the difference between your offset mortgage balance and your offset savings balance.

Your adviser will be able to confirm the equivalent savings rates for each offset product. These are based on the current interest rate for each mortgage product. Where the rate of your offset mortgage is variable or reverts to a variable rate after an initial fixed rate period, the equivalent savings rate will change when the relevant mortgage rate changes.

With traditional mortgage and savings products you usually pay a higher rate of interest on your borrowings than you receive on your savings. If you’re a taxpayer, you may also pay tax on the interest that you earn on your savings.

The benefits of overpaying or saving more

Once your savings are offset against your mortgage, you can still add to them. Unless savings rates elsewhere are too tempting, you might want to consider this, as more money offset means more interest saved.

Some offset mortgages also allow you to overpay. This will have the same effect of saving you interest, but as you’re physically repaying part of your mortgage, you’ll likely won’t be able to get the money back later. Offset savings, on the other hand, remain alongside the mortgage. They don’t repay it, so you still have access to your money.

Offset Mortgages can help children get on the property ladder

Offset mortgages can offer a great alternative to becoming a guarantor or physically giving your child money towards buying a new home. While there are only a few mortgages, if any, that will allow the parent or guardian to add their savings directly and retain some direct control, it’s entirely possible for you to gift the funds to your child, with the promise of getting them back later – as long as your child doesn’t default on their mortgage payments.

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Bridging Loans

A bridging loan or bridge loan is a short term loan given to ‘bridge the gap’ between you buying a new house and selling your previous house.

Secured Loans

Secured loans – also known as homeowner loans, home loans or second-charge mortgages – allow you to borrow money while using your home as ‘security’ (also called ‘collateral’). This means the lender can sell your property if you aren’t keeping up with repayments, as a way of getting their money back.

Expat Mortgage

An expatriate (often shortened to expat) is a person either temporarily or permanently residing in a country other than that of their citizenship

Portfolio Mortgages

There are now 2.5 million landlords in the UK and successful investors have been able to establish a Buy to Let portfolio of a number of properties. But changes by the Prudential Regulation Authority have introduced new checks for Buy to Let portfolio mortgages.

Offset Mortgages

The idea behind an offset mortgage is simple and straightforward. By linking your mortgage and your savings, you can bring down the cost of your loan. This is because rather than earning interest, your savings reduce the amount of interest you pay on your mortgage.

Self Employed Mortgages

ne of the misconceptions about the mortgage market is that it is now very difficult for self employed people to get a self employed mortgage loan in order to buy a home. It’s certainly true that one type of mortgage used by the self employed in the past (self certification mortgage) is no longer available – but for many self-employed people, their chances of being able to borrow are still just as good as anyone else’s.

Contractor Mortgages

Being a contractor can offer you flexibility and independence, but also uncertainty – especially when buying a home. But as the number of freelancers and independent contractors in the UK climbs, don’t despair – many mortgage lenders could be willing to lend to you, even if your income jumps around.

Self Build Mortgages

Building your own home is not for the faint hearted. And on top of everything else, you’ll need to take out a special self build mortgage to finance it. We can walk you through the self-build process step-by-step, from finding land to hiring professionals to help you.

Private Bank Mortgages

Many borrowers needing a larger loan are unaware of the bespoke offerings that private banks have. With a product specifically tailored for you and your income, you may be surprised what our relationships in this area can achieve.

Commercial Mortgages

Are you looking to expand your business? Have you realised that the cost of renting has become too great? If so, you might find that a commercial mortgage can offer business finance options you weren’t aware of. Here’s everything you need to know.