A simples guide

Compare offset mortgages

Offset mortgages can be a perfect way to manage your money, but they’re complex beasts so you need to know if an offset mortgage is right for you. The simplest way to do that is to compare the best deals in one place, so let us help guide you through the mortgage maze. 

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What is an offset mortgage?

An offset mortgage can help organise your finances to save you money by using your savings to help reduce the interest you pay on your mortgage. It’s relatively simple too, when you understand it. Essentially if you have a £100,000 mortgage loan and £20,000 in savings, then the savings are used to offset the mortgage and you pay interest on just the £80,000.

And if you keep your monthly payments at the same level as you would have paid with a normal mortgage you effectively overpay every month.

So your mortgage will be paid off early, you’ll be in profit quicker if you’re a Buy to Let landlord and if you’re the homeowner then it means you’ll pay less and own your own property outright that little bit faster.

It makes your money work harder for you and could save you thousands of pounds in interest and charges over the course of the mortgage if you find the best offset mortgage. 

house and piggy bank
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What are the benefits of an offset mortgage?

With interest rates at an all-time low, savers’ money really isn’t working hard for them. Using savings in an offset mortgage instead is just one way you can make your money work harder.

The interest that you will save almost always beats the interest you could earn on the savings. Anything that is earned through the savings account would attract at least 20% in tax (higher for higher rate tax payers) if not held in an ISA and over the initial £1000 tax free savings, using it with a buy to let mortgage means your savings don’t earn income so will not be taxed – it can be a great way to minimise tax, as well as investing in your future. 

Is an offset mortgage right for you?

Offset mortgages can be a stunning way to arrange your finances if you have savings that aren’t working well for you right now. It offers a tangible benefit that you’ll feel for the rest of your life as your mortgage comes to an end well before the date you originally planned with a normal mortgage.

In real terms, simple savings are falling in value right now thanks to the combined issues of inflation and low interest rates. So alternatives like offset mortgage rates are winning legions of fans throughout the country.

Be careful though if you already have your savings invested in ISAs or other financial vehicles that are giving you good returns then the sums become more complex. In that case, in fact in any case, you should seek expert and tailored financial advice to decide what the best solution is for you.

Offset mortgages can also be a great way for a contractor or self-employed person with substantial earnings to make the most of their money, while saving for a tax bill. Effectively the money is reducing the interest owed on the mortgage while it is building up in preparation for the annual tax bill.

Most offset mortgages require a deposit of 25%, so bear that in mind, but in a lot of cases you can also link your current account, as well as your savings. So you can make significant inroads into your mortgage costs if you have a large amount of positive cash flow.

An offset mortgage is just one way to arrange your finances, but it can certainly be an attractive option if you want to make every penny of your money work harder for you.

So if you’re thinking of taking out an offset mortgage, take a look at our mortgage comparison tables and we can help you see through the fog and settle on a course of action that works for you.

 

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