OFFSET MORTGAGES

Important information – Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up with repayments on your mortgage. Please note that the Financial Conduct Authority (FCA) does not regulate most buy to let mortgages.

An offset mortgage allows individuals who have cash savings to use them to ‘offset’ an outstanding mortgage. This is usually done by linking the accounts of both the mortgage and savings with the same provider. This has the effect of reducing the amount of interest you pay by the size of the sum offset. However in order to achieve this, your forego the interest you would have received on deposits. This product type can be advantageous since the interest charged on a mortgage is typically higher than that earned on savings interest.

If you had an outstanding mortgage totalling £150,000 and had £60,000 in savings, if you offset those savings you would only have to pay mortgage interest on the £90,000 difference. If your savings interest was 1% per year and the loan interest was 4% per year, this would result in a net saving of £1800 each year.

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Mortgage key features

  • Typically savings have to be deposited with the same provider
  • Allows withdrawals providing flexible access to cash when needed
  • Avoids unnecessary early repayment charges (ERCs)
  • Possible to offset on another individual’s mortgage
These mortgage  products are suitable for prospective homeowners with substantial cash savings looking for an alternative secured loan product, for reasons which include:

  • Wish to avoid early repayment charges but still benefit from lower interest payments;
  • Saving for a future tax bill if self-employed and want continued flexibility to withdraw when necessary to aid cashflow;
  • Saving on taxation on interest through offsetting as a higher or additional rate taxpayer

Mortgage calculators

These products typically allow drawdown on cash deposits to be made when necessary. This can act as a safety net or insurance policy should unexpected costs arise in the future. Withdrawals can be made without penalty in most cases, but will result in monthly payments increasing as less savings are being offset. These products can also be beneficial in helping a family member get onto the property ladder as many lenders will allow your savings to be offset against another mortgage.

How a lender assesses your application

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Making overpayments

Some providers allow you to make overpayments on your mortgage by deducting from the savings you deposited periodically. Whilst this can be a beneficial way of paying off your mortgage quicker, by overpaying you will then lose the flexibility of having access to that cash later on for whatever reason. It is important to set limits on your overpayments to ensure you do not encounter any unwanted early repayment charges. Another method of overpaying is by adjusting your monthly repayments to a level as if there was no savings being offset. This increased payment would result in more of the loan being paid off each month.

Mortgage calculators

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Benefits of getting a mortgage through us

Whole of market

Our panel of lenders include both high street institutions and specialist companies that can offer bespoke mortgage products specific to your circumstances.

Looking ahead

We take a long-term view to organising your mortgage, taking into account your future goals to find a solution that works both now and going forward.

Save you time

By understanding the general criteria of different lenders, we work to focus our search on products that offer the best opportunities for acceptance and are cost-effective.

Independent

As a company, we are privately owned and therefore are not tied to any insurance company. We work for you rather than someone else to find you the best deal.

Aftercare support

We know that a mortgage is a large commitment and continue to remain in contact with you to ensure your selected product remains suitable over the term of the loan.

Save you money

Some of our lenders only accept applications from advised clients, but can offer market leading rates. This can result in a considerable saving over the term of the loan.

Some things to consider

ISA returns

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Larger deposits

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Saving for a tax bill if self-employed

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If you have a question, visit our FAQs section. If you cannot find what you are looking for, contact our team for more information.

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Offset Mortgage insights

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