offset

What is it?

An offset mortgage is a variation on the flexible mortgage. With an offset mortgage credit balances in your current and savings accounts are set against your mortgage balance. Interest is only charged on the outstanding amount, meaning that interest payments are reduced.

What does it offer?

An offset mortgage can enable you to reduce the total amount of interest paid and decrease the term of your mortgage.

When is it worth considering?

With tax being charged on the interest credited to current and savings accounts, an offset mortgage can be a tax efficient option, particularly if you are a higher rate tax payer.

You could also make savings if you own your own business and have large movements in cashflow which you can offset against your mortgage.

What should I be aware of?

For many people an offset mortgage may be no more cost-effective than a discount mortgage.

Calculators provided by lenders can inflate the apparent savings offered by an offset mortgage by making the assumption that the additional balances that you offset would not be earning you interest elsewhere.