What Are Offset Mortgages and How Do They Work?
Your property may be repossessed if you do not keep up repayments on your mortgage.
A Flexible Solution for Homeowners
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.
Flexibility and Benefits of Offset Mortgages for Savers
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.
Vulnerable Customer
We understand that from time to time our clients may find themselves dealing with circumstances which could mean they are potentially vulnerable. For example, a change in health, caring for a family member or coping with the loss of a loved one. There are many different types of vulnerability, and what makes one person vulnerable might not affect someone else. When we are vulnerable, our need for financial advice may change. However, admitting vulnerability or seeking help can sometimes feel hard.
If this is something you would like to discuss with us, please ask for a copy of our support guide or download a copy here. This guide is designed to help explain vulnerability and the ways in which we might be able to support you. If you feel any of the circumstances in the brochure apply to you, please talk to us.
