1.99%
For some people, an offset mortgage can prove an extremely
flexible yet tax efficient mortgage option. In its most simplistic
form, the offset mortgage works by using a savings 'pot' to cancel
out (or offset) against mortgage debt, thereby only paying interest
on the actual debt.
What Benefits Does an Offset Mortgage Offer?
With an offset mortgage, savers also avoid having to pay tax on
interest that their deposits may have otherwise incurred. Interest
on offset mortgages is calculated on a daily basis, so interest is
only ever paid on the actual balance. The flexibility of the offset
mortgage makes it an attractive option for those working in sales
or on a commission basis, or the self employed who's earnings can
fluctuate on a monthly basis.
Flexibility
Generally, there are two types of flexible mortgage that use the
offsetting principle - those that link borrowers' separate deposits
to the mortgage balance (such as individual current and savings
accounts) and those that use one generic 'savings pot'. Where only
one deposit exists, if more money is put into the deposit, then the
mortgage balance reduces; if money is withdrawn from the deposit,
then the mortgage balance is then increased.
Where individual balances are linked for the purposes of
interest calculation, other debts such as personal loan repayments
and credit card debt can be consolidated into the offset mortgage
balance, with one interest rate paid across the entire debt. In
this instance, another benefit is that customers can reduce the
debt balance at any time with additional lump sum payments. Some
offset mortgage deals also allow the borrower to withdraw from the
balance, underpay or take payment holidays as required.
The repayment terms for different types of offset mortgage will
vary from lender to lender, with some requiring regular monthly
payments. Any savings above this amount are offset against the loan
and reduce the interest charged on the mortgage. This is, in
effect, a monthly overpayment that will eventually reduce the term
of the mortgage, and the overall amount of interest paid.
In the UK, offset mortgages are still a relatively new
phenomenon, with many companies stipulating different lending
application criteria. Comparing and considering the plethora of
complex mortgage deals to suit your circumstances can prove a
demanding task. But with our comprehensive knowledge of the dynamic
mortgage marketplace, as well as access to an extensive range of
mortgage lenders, you're sure to find the best offset mortgage deal
to meet your needs.
For more information or expert advice on offset mortgages, or
help in finding the best mortgage rates, please don't hesitate to
contact us
today,and see how much you could save with
MortgageFinancialAdvisor.co.uk.