With choice once again flowing back into the mortgage market, Offset mortgage deals are making a particular splash. It’s ten years since the Woolwich and other lenders pioneered the concept. The basic principle is that you do not pay interest on the amount of your mortgage loan equivalent to amount you hold in your savings account.
There are different sorts of offset, and with some your mortgage and bank accounts are combined. With the more popular type, you manage your different accounts as normal, but behind the scenes, your lender sets your savings against your loan. You pay interest on only part of your loan, but your monthly payment is calculated on the whole amount – so your mortgage will be paid off more quickly. Other offset deals offer you the chance to reduce your monthly payment. You can also save on the tax you would otherwise have paid – a particular boost for higher rate taxpayers.
The flexibility of offset is reckoned to be an advantage in the current economic climate. They allow overpayments to be made without penalties. They can offer a worthwhile benefit from savings at a time when many are seeing low returns from deposits further eroded by tax and inflation. Offsets have traditionally been linked to variable rate mortgages, but now a number of fixed rate deals, some lasting ten years, have been announced. But offsets don’t suit everybody. So to discuss offset deals and other ways of borrowing flexibly, talk to GoRemortgage.
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