What is an offset mortgage?
An Offset Mortgage is when cash savings you have in a bank account held with the same provider of your mortgage loan are used to reduce or ‘offset’ the interest on your overall mortgage. The linking of these accounts means you can either reduce your monthly mortgage payments or pay off your mortgage sooner.
How can an Offset Mortgage Help Me Save Money?
Offset mortgages allow you to link both your current and saving accounts to your mortgage loan. The monthly balances of the linked accounts then offset the outstanding loan on the mortgage each month. For example, if you had a mortgage balance of £150,000 and £50,000 in savings, you would only be charged interest on £100,000 as the balance of the savings account is then ‘offset’ against the mortgage loan. It is important to note that any linked accounts will not accrue interest while they are linked to the mortgage.
You can then ask your lender to use the interest you save to reduce your monthly payments, or it allows you to reduce the length of your mortgage by offsetting the savings against your overall mortgage balance.
Can I still Withdraw Money from an Offset Account?
In short, yes, you can still withdraw money from an Offset Account. However, if you take money from your savings, you will have less money to offset against the mortgage, and your monthly payments will then start to increase. Also, depending on your lender, you may need to keep a minimum balance in your saving account. Your financial advisor will be able to let you know of minimum requirements when selecting the best offer.
What Mortgage Rates are available with an Offset Mortgage?
Offset Mortgages are similar standard mortgages in this respect as you can choose from both fixed and variable and tracker mortgages. Deals are available across the market and can last for two, three, five or 10 years, or can be fixed for the whole mortgage term. A qualified financial advisor will be able to assist you in choosing the best deal for your circumstances.
Should I pay a Higher Deposit Instead of Offsetting?
If you have savings you might find that it is better for you to put them down as a deposit for on your home as often, a larger deposit means you will be offered mortgages with lower interest rates. However, if you choose to have an offset mortgage, this means that you still have easy access to your money should you need it. Opting for an offset mortgage might be right for you if you are expecting a change of circumstances or think it’s likely you will need to access cash in the future.
Why choose Molyneux Associates, Torquay for your Offset Mortgage
Qualified financial services advisor Kevin Watling will administer your Offset mortgage. Kevin has been providing excellent financial advice to homeowners on offset mortgages and other financial products for more than 30 years. Kevin can search a large variety to lenders, meaning he can advise on the very best solution to your needs.
At Molyneux Associates Torquay, our services also include, Equity Release & Mortgage Advice, Pension Advice, Investment Advice, Mortgage Advice and Protection Advice.