Offset Mortgages

Offset mortgages are a twist on standard repayment mortgages.  They combine a mortgage and a savings account.  The money you keep in your savings account is set against the outstanding balance on your mortgage.  This means that instead of receiving interest on your savings, you pay less interest on your mortgage.

For example, let’s say you borrow £200K and have savings of £20K.  You would only pay interest on 180K of your mortgage.  What’s more, as you would be paying less in interest costs rather than receiving interest payments, you would not (currently) have any tax liability. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

You can still get access to your savings if you need them, although you might need to give notice or pay a withdrawal penalty.

Offset mortgages may be a useful solution for people who need to keep relatively substantial cash savings, even when interest rates are low.  For example, if freelancers work as sole traders rather than limited companies, they could put aside their tax money in their savings account.

For more information, please contact us.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.