Offset Mortgages
If you've got savings an offset mortgage could not only save you money but dramatically reduce the term of the mortgage too, by offsetting your savings against your mortgage, the lender will reduce the amount of interest you'll pay, but that's not all, the way in which the mortgage reduces the interest repayments also has noticable tax relief benefits.
Today's Best Offset Mortgage Deals
Offset  |
Fixed | 5.19% Until 31/10/11 | 4.3% | 75% | - |  |
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Tracker | 3.69% For 2 Years | 4.3% | 60% | - | |
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Discount | 3.29% Until 30/11/12 | 5.1% | 60% | £1098 | |
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Tracker | 2.97% For Term | 3.1% | 70% | £1499 | |
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Tracker | 3.75% For Term | 3.9% | 75% | £1495 | |
About Offset Mortgages
The benefit of an offset mortgage is derived from offsetting the balance of your current account or savings account against your mortgage, for example if your mortgage is £120,000 and you have £5,000 in your savings account you'll only pay interest on £115,000 but you won't receive any interest on your savings. It works in a simalar way to a current account mortgage but rather than having a single account an offset mortgages allows separate account to aid managing your money, you will however have to move your saving to an account with your mortgage lender. To notice a sizable saving you'll need roughly 10% of your mortgage amount in your savings although even smaller amounts good save you thousands.
The Tax Benefits
The tax benefit is quiet substaincal, and has several aspects, firstly the rate of interest you'll pay on your mortgage will probably be higher than the rate you would get from your savings account, secondly interest on savings is taxable but as you won't be recieving any interest you'll pay no tax. For example if you sacrificed the interest from your savings account paying 4% and instead offset it against your 5% APR mortgage the tax relief would equate to an equivalent savings account paying 8.33%!
What To Look Out For
You have to be in the right finance position to really reap the rewards of an offset mortgage, the rates are likely to be a little higher so you'll have to have enough saving to balance the difference. You will also have to keep a closer eye on your finances, dipping into your savings could cost you thousand over the term of the mortgage.