What Is An Offset Remortgage?
With an offset remortgage, instead of having one big pot of money you keep your savings, your mortgage and your current accounts in separate sections. However, your savings will be used to reduce (ie, offset) your mortgage. So, if you're a person with a £200,000 mortgage and have £30,000 in your savings then you only pay interest on the £170,000 difference. As with a current account mortgage you'll make a payment every month but your savings will work as an over payment to wipe out more capital each month and assist you in paying off the mortgage early.
It's also very good for tax reasons due to the interest rate and the interest rate on the £30,000 you have in your savings is lower than the rate on your mortgage. Plus you'd need to pay tax on any interest you got, so it's better to pay less interest on your loan than it is to earn more in your savings. These accounts, therefore, are perfect for those with a high taxable income and also those who are self employed as they use their cash over the year to pay their taxes and reduce the mortgage.
Obligation Free Remortgage Quotations
Get a Quote »The positives of an offset mortgage is thar you're over paying your mortgage every month and it will clear quicker. Plus, it's tax efficient and your savings and debts are separate to give you more control of your money. On the negative side, just like with current account mortgages, the interest rate is higher so you need good savings already with you- usually 40% of your mortgage value- and also need to be aware that spending your savings will make your mortgage more expensive.