Demand for Offset mortgages has decreased since the 1990s. Although they’re still a great option for customers who are able to put something aside each month. They’re also helpful if you are due to receive a lump sum in the near future.
When you take out an offset mortgage, the lender will present you with a savings account to go along with it. This being the sole purpose of the mortgage. Rather than attracting interest, the money offsets against your mortgage balance. For example, if your mortgage is worth £90,000 and you have £10,000 in savings. Then you only pay interest on the final £80,000.
Offset Mortgages are usually very flexible arrangements. Until the mortgage is completely offset, you can put as much money in there as you would like. The money you save is always instantly accessible. So comes in handy if you need somewhere to store any emergency funds.
One of the amazing things about it is that it saves interest, as opposed to attracting it. So you won’t pay tax on anything that goes in there.
If you feel you are due a lump sum for any reason, such as future inheritance, this can be helpful as you can store your money until you decide what to do with it due to it being interest-free. This also applies to any annual or quarterly bonuses from your current job – If you don’t rely on any of it.
Because this is freely accessible at any time, you could always dip into your additional savings for other uses, whilst leaving the rest towards your mortgage. You must remember to keep a considerable amount in though to make your offset worth your time!
An Offset is a great opportunity for First Time Buyers who plan to overpay on their mortgage. Over time, additional payments can reduce your mortgage payments for your next term, thus reducing interest rates too. With other mortgage types, the money you put in isn’t able to be withdrawn again until the end of your term, which can be less than ideal if you change your mind or need to take some of it out early.
Because your Offset allows you to use a savings account, you can take out the funds at any time, then put them back in when you’re ready. So, if you’re looking to make further payments on your mortgage over time, we’d recommend taking advantage of your Offset savings account.
You should consider all your options when speaking to a mortgage advisor in Liverpool. Many customers who like Offset Mortgages tend to keep on using them and are less likely to remortgage as other customers. They can be rather hard to understand though, so not everyone goes with this option.
Your advisor will be able to show you the impact of how an Offset can save you money over the course of the full term. If you have any questions about Offset Mortgages or Remortgages, please get in touch and we’ll be happy to discuss the topic further.