Colli Real Estate

Mortgages – Offset Mortgages

With growing uncertainty as to the housing market in the UK, offset mortgages are becoming more common.

This type of plan allows homeowners the chance to reduce interest by offsetting credit balances against the mortgage debts.

This would mean that interest would only be charged on the net balance of the mortgage, giving homeowners the chance to save money by cutting out a portion of their costs.

By combining home loans and savings in an offset mortgage, homeowners could find themselves saving money on interest, as the savings part of the agreement would not be susceptible to the interest rate associated with mortgages.

Through this method, borrowers can effectively overpay each month, allowing for greater flexibility of payments and the opportunity to clear their mortgages quicker.

Because you’re combining savings with the mortgage itself, there is the potential to use those savings to make monthly repayments – effectively giving yourself a repayment holiday.

However if you also want to contribute a little more than the minimum payment each month, there is the option of paying in as much extra as you like on a regular basis, or through a lump sum. Whilst this method may not pay off the loan itself, it can help to cut the balance, on which interest is calculated.

Offset mortgages offer flexibility in payments, allowing borrowers to pay off a portion of the loan before re-borrowing up to the maximum figure in order to cover areas such as home improvements.

There are now a wide range of different deals available for those looking to switch mortgages, most offset mortgages are organised through mortgage brokers rather than directly.

If you’re looking to remortgage your property, it is advisable to shop around for an offset mortgage deal. Lenders usually set credit limits for such mortgages, allowing borrowers to plan repayments more effectively, many lenders also allow full drawdown up until the end date of the mortgage.

About the Author

David is an experienced writer based in the UK, currently working in the dotcom industry

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