What is an offset mortgage?

Offset mortgages are only offered by a relatively small number of lenders including Barclays, Coventry Building Society, Accord (the intermediary only arm of Yorkshire Building Society), Clydesdale Bank and Scottish Widows Bank.

Several of these providers have online offset calculators to help you work out whether an offset deal could be right for you, but as a general rule, the more savings you have, the better an offset mortgage is likely to be.

For example, using Yorkshire Building Society’s calculator, we found that someone with a £150,000 offset mortgage fixed at 1.99% with 10 years left to run, who has £30,000 in savings, could pay off their mortgage in nine years and seven months and save £3,039 in interest, compared to if they’d chosen a standard mortgage at a lower fixed rate of 1.64%. This example does not include any arrangement fees.

However, if the same person only had £5,000 of savings to offset, they wouldn’t save any interest and would pay their mortgage off only a month earlier than if they’d opted for a standard mortgage. Their monthly payments at the 1.99% offset rate would be £1,380 compared to £1,356 for the 1.64% non-offset deal.

It’s not always easy to work out which mortgage option is right for you, so if you’re in any doubt, it’s worth speaking to a professional mortgage advisor. You can read more on why this might be a good idea in our guide should I get advice on my mortgage?

Author: wpadmin

Leave a Reply

Your email address will not be published.