Offset Mortgage/Current Account Mortgage

An offset mortgage is a flexible mortgage that allows you to combine your savings and in some cases current accounts with your mortgage.

Whereas traditionally you would pay interest on your mortgage at one rate and earn interest on your savings or current account balances at another, an offset account allows you to completely offset the interest that you earn on your savings against the interest that you pay on the mortgage for the equivalent balance.

Example.

Traditional Method

Mortgage Balance £100,000
Annual Mortgage Interest @ 5% £5,000
Savings Balance £40,000
Annual Savings Interest @ 4% £1,600
Balance of Interest Paid and Interest Earned £3,400

Offset Method

Mortgage Balance £100,000
Savings Balance £40,000
Annual Mortgage Interest on £60,000 @ 5% £3,000
Balance of Interest Paid and Interest Earned £3,000

Using an offset mortgage facility could reduce your mortgage term significantly and ultimately reduce the overall amount that you pay back.

Offset mortgages are ideal for those who have significant levels of savings and a good level of income through their current accounts each month.

With an offset mortgage you do not earn any interest on your savings and therefore will not pay any tax on them. This can be ideal for the self employed who want to save for their annual tax bill or for higher rate tax payers who are currently paying 40% tax on their savings interest.

As offset mortgages are flexible they have all the same features such as overpayments, underpayments, payment holidays and drawdown facilities that may be found with standard flexible mortgages.

For more information and to request your free, no obligation consultation with one of our qualified, experienced mortgage advisers, please contact us using the quick enquiry form below.