What is an offset mortgage?
David Lauder talks us through the potentially very powerful offset mortgage
There are many types of mortgage plans available in the market place at present and potentially one of the most powerful in terms of providing a saving can be an offset mortgage.
Pay off your mortgage quicker
This type of mortgage is not suitable to all types of clients, but for people who have good savings in the background or good month to month surplus then their money could be better served in this facility. Basically how it works is your outstanding mortgage balance is offset by your savings balance, which may be requried to be with the mortgage provider, and you only pay interest on the surplus balance of the mortgage instead of the full amount.
However, if you continue to make payments based on a 100k balance then your mortgage will be repaid quicker and the interest payable will be considerably less during the mortgage term. You also have the option to pay in lump sums at your discretion if you prefer.
Make money work harder for you
Please not the savings in the offset facility accrue no interest, however savings rates at present are very poor and by re-directing this money into the offset facility instead it is likely the mortgage rate charged will be higher than a standard savings account, which means your money will be working harder for you. This is not for all clients and you may need to be at a certain stage of your financial life for it to be suitable but professionals, high net worth clients or people who are disciplined with their money could certainly find this a suitable solution. The rates could be slightly higher for the facility but if your finances are conducted in the correct manner then the saving should more than justify this slight increase.
Want to know more?
David Lauder is a Financial Planning Consultant who helps clients to find the most suitable mortgage solution tailored to their circumstances along with identifying any other gaps they may have in their finances. Call David on 07810522422 for more information.
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The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.