Offset Mortgage Explained

An offset mortgage uses the money you have in your savings to help you save on your mortgage payments - the more money you have in your savings the more you save on your mortgage payments. The way an offset mortgage works is that the money in your savings and current accounts are used to reduce the mortgage balance on which you are charged interest. The great thing with an offset mortgage is that you can reduce your monthly mortgage payments or your mortgage term whilst still having instant access to your savings - very handy in a credit crunch!

Currently savings rates are particularly poor and an offset mortgage can make your savings work harder for you than stuck in a savings account. It should be kept in mind though that an offset mortgage can be beneficial at anytime, not just when interest rates are low.

Here's an example of how an offset mortgage might work:

You have a mortgage of £170,000 and a total of £20,000 in your savings and current accounts, which can be offset against your mortgage. With an offset mortgage, your mortgage interest will now be calculated based on the net balance of £150,000. This could save you thousands of pounds over the life of your mortgage. With an offset mortgage you can work out exactly what's of greater benefit to you: reducing the term of the mortgage or reducing the monthly mortgage payments freeing up some much needed cash.

To find out more why not give us a ring on 0845 148 9165 or request a call back. Don't forget you can take a look at our best mortgage rates and deals and see what mortgage products suit you.