What is an offset mortgage?
An offset mortgage is where the borrower utilises
the balance of their bank account to reduce the amount of interest
payable on the mortgage held with the lender.
If the borrower has a £100,000 mortgage, but also
has £20,000 in the bank, then they will only pay interest on £80,000
of the mortgage.
The £20,000 is "offset" against the mortgage, and as
a result no interest is payable on the savings, which means no tax is
payable on the zero interest payments. Its a tax efficient method of
paying mortgage interest.
As a rule of thumb, an offset mortgage is only of
benefit where the borrower holds "a significant savings balance".
Historically this has been because the interest rates available on
other types of mortgages have been lower i.e. heavily discounted
mortgages for the first year or two, as an example..
However, at the time of publishing this web page one
bank was offering an interest rate of below 3% on their offset
mortgages which compares favourably with other options available.
details below to be contacted by a Financial Services Authority
mortgage broker who will explain the details of offset mortgages
and access a quote for you.
No information on this website is intended to constitute advice.
This site contains a summary of the information relating to the
products and is not intended to promote any specific mortgage or
insurance product or provide mortgage or insurance advice. It is for
information purposes only.