The general popularity surrounding Offset Mortgages has dipped since their rise during the 1990s, though some of you may be pleased to know that they are still a great option for customers who have the ability to put some money aside every month.
They’re also quite good if you believe that you are due to receive a lump sum in the near future.
When you start out with your Offset Mortgage, you will be given a savings account by the mortgage lender that will run alongside your mortgage, for the sole purpose of aiding your mortgage. Rather than racking up interest, the money will offset against the balance of your mortgage.
As an example of how this works, let’s say that your mortgage is worth £100,000 and you have managed to save up £15,000 in savings, then you will only be paying interest on the £85,000 that is left.
Offset Mortgages tend to be rather flexible arrangements. Until you have completely offset your mortgage, you will have the ability to put as much money as you would like into it. You will always have instant access to the money that is in your savings, so if you need to dip in for any emergencies, you know that it is there.
One of the things that is really great about Offset Mortgages, is that it saves interest, as opposed to adding it on, so you won’t have to pay any tax on any savings that you put into your savings. Higher rate taxpayers are definitely big fans of these!
An Offset Mortgage is a great option if you are due a lump sum for any reason, such as possible inheritance, as because it is interest-free, it allows you to store your money until you know what you want to do with it. This also applies to any annual or quarterly bonuses from your job that you have no dependance on.
Because your savings account will be freely accessible at any time, you are able to dip into your additional savings for other means if you need to, whilst leaving some in there for your mortgage. It is important to remember that you need a substantial amount in there though to make your Offset worth taking out!
An Offset Mortgage can work out really well for First-Time Buyers in Manchester who have any plans to overpay on their mortgage. Looking further down the road, once your current term ends, overpaying can potentially reduce your mortgage payments for the next term that you take, reducing interest rates in the process.
With other mortgage types, any money that you put towards your mortgage cannot be withdrawn at any point, with releasing equity being your option once your term has ended. This is a situation that is less than ideal if you have any second thoughts or need a short term boost to your income.
It’s times like this where Offset Mortgages are rather clever. Because you have a savings account, you will have the ability to take out the funds at any time, then put them back in when you are ready to do so.
So, if you’re looking to make any further payments on your mortgage over the term, we’d recommend making use of an Offset Mortgage savings account.
You should consider all of the options that are available to you when you get in touch with a Mortgage Advisor in Manchester.
Some consumers who like using Offset Mortgages tend to keep going with them and are less likely to Remortgage than another homeowner might be inclined to. The may seem a little complex though, so there are customers who may not use this option.
Your dedicated mortgage advisor will be able to show you the impact of how an Offset Mortgage can potentially save you money over the course of the full mortgage term.
If you have any further questions relating to the topic of Offset Mortgages or a Remortgage in Manchester, feel free to book online for your free mortgage appointment and we’ll happily talk you through whatever you need help with.