OFFSET MORTGAGES
Saving Money an Offset Mortgage
Using an Offset Mortgage allows you to reduce the interest costs to your mortgage, and use your savings without losing access to your funds. Pay off your mortgage sooner, or reduce your monthly payments, with tax-efficiency built in.
Benefits Of Offset Mortgages

Here are just a few of the benefits that come with having an offset mortgage.
Lower interest payments
An offset mortgage allows you to link your savings account, and mortgage balance, together. The balance of your savings account is then offset against the balance of your mortgage. This effectively reduces the amount of interest you pay on the mortgage. By offsetting your savings, you reduce the interest rate charged on your mortgage.
Flexible payments
Another benefit of an offset mortgage is that it allows you to make flexible payments. You can overpay your mortgage as much as you want, and if you need to access your savings in the future, you can do so with ease. This can be particularly useful if you have irregular income or unexpected expenses.
Reduced mortgage terms
One of the main benefits of an offset mortgage is that it can help you pay off your mortgage faster. Because you are reducing the amount of interest you pay, this means that more of your monthly payment goes towards reducing your mortgage balance. This can help to reduce the term of your mortgage and potentially save you thousands of dollars in interest payments.
Tax benefits
Offset mortgages are unique in that they can offer some tax benefits. Because your savings are offset against your mortgage, the interest earned on your savings is not subject to tax. This can help you to save money on taxes and increase your net savings.
Convenience
Finally, an offset mortgage is a convenient option for homeowners. With an offset mortgage, you can easily keep track of your payments and savings in one account. This makes it easier to manage your finances and ensure that you are making the most of your money.
In conclusion, offset mortgages offer unique benefits that can help homeowners to save money and pay off their mortgages faster. With flexible payments, lower interest rates, and potentially tax benefits, an offset mortgage is an excellent option for those who want to save money on their mortgages and take control of their finances.
Example of an Offset Mortgage
Dave and Sally are both self-employed, with £45,000 of savings and they add extra money through the year to save for their tax bill each January. They have a £315,000 mortgage and are looking at ways to reduce their mortgage costs.
Existing Mortgage
Their current mortgage is on a repayment basis, with 25yrs to go. Their quoted rate is 4.5% for the next few years. They don't overpay the mortgage, putting any surplus funds into their savings. Cost approx. £1750pm
Existing Savings
They use their banks' easy access deposit account. The current rate paid is 0.5%, whilst they have thought of finding a new account, the convenience of online transfers and access to the savings is useful. Current monthly benefit of £18.75.
This equates to a net cost of £1731.25pm
How the Offset Benefits you
The new Mortgage Lender, with the offset arrangement in place, will only charge interest on the difference between the mortgage and savings, so £270,000 in this situation. The payments could be reduced to £1585pm if the term remains 25yrs, or if the same mortgage payment of £1750pcm is maintained then you will save 4 years off the term of the mortgage, saving £86,910.
As you can see Dave and Sally would save a considerable amount of money, either with reduced monthly payments or over the term of the mortgage. Their equivalent mortgage interest rate, assuming the original rate of 4.5%, is now just 3.55%, almost 1% lower simply by having the Offset arrangement.
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