What is an offset mortgage, I hear you cry. How can it save me money? I hear you deplore. Well, if you want some great advice on how to save a packet on your mortgage you are in the right place. Let’s give you the skinny on offset mortgages.
What is an Offset Mortgage?
Offset mortgages have been something of an innovation. With saving rates and interest rates at an all time low, they are proving to be popular with many Brits. Why? Offset mortgages can save homeowners a tidy sum on their interest rates. In short, it is a tax efficient way of boosting your savings. What is more, you can become debt free quicker. This is great news for people all over the UK. Of course, this is not going to benefit everyone, but for many, this is fantastic news.
Hooray for Low Interest Rates!
As you may well be aware, interest rates are at an all time low. This is great news for homeowners and prospective homeowners alike. Banks are now inclined to pass on these savings to their customers. This means that you are likely to get a great mortgage at a low price. This is positive news for all. The burgeoning economy means that your mortgage is now more affordable. What is more, for people with offset mortgages, you are likely to see an impact on your interest rates. To make a saving you need to beat the interest rates. With an offset mortgage, you are more likely to do this in the main. This means that you are saving, as opposed to losing money. Great news all round!
Jargon Busting: How Offset Mortgages Can Help You
An offset mortgage means that you link your money to your savings, not your mortgage. In layman’s terms: instead of earning interest, your money is ‘offset’ against your mortgage. Estate agents in Waltham Cross have stated that the best way for savers to make money on their mortgage is to take out an offset mortgage.
Yes. This is confusing. Bear with me.
So, during your mortgage term, the loan gains interest, by offsetting the interest you actually pay less. The rates of interest on your debt are lessened. This means that you are clearing your mortgage quickly. Rates of interest mean that your mortgage can be higher. As you are paying more of your mortgage each month, as opposed to paying for the interest you are paying for the capital within your home. Therefore, you are mortgage free in a much quicker time.
Where Can I Get an Offset Mortgage?
Any of the high street lenders will allow you have an offset mortgage. But, this only works in the interest of people who have a substantial amount of savings. If your mortgage is £200,000, but you have £50,000 in savings, you only pay interest on £150,000. Your savings are linked to the interest rates. If you don’t have a large amount of cash in the bank, this will not work for you.