Offset Mortgages

Offset mortgages allow current and savings bank accounts to be linked with your mortgage loan. This "offsets" the amount of debt that interest can be charged on. For example; if you have a mortgage for £90,000 and a savings account containing £15,000, then the actual debt you pay interest on is only £75,000. This over the term of a mortgage can save you a huge amount of money. It is also worth noting that when your bank account and mortgage are linking you will no longer receive interest on you savings account. This however does give you the advantage of having a tax efficient savings account, as you won't receive interest you won't be taxed on the money either.

Offset mortgages are an extremely useful vehicle for the self-employed and those that have a variable salary coming in each month. Obviously the less you pay off each month the longer the term of your mortgage will be, but on the other end of the scale overpaying could reduce the length of the mortgage loan. This is a very simple explanation of offset mortgages and you should always check the terms and conditions of your offset mortgage provider first.