Offset Remortgages
There are a host of different types of mortgage available today suit consumers with different needs and finances. Offset remortgages are ideal for people who have savings that they'd like to maximise on.
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An offset mortgage links your savings, and sometimes any balance in your current account to your mortgage. Given that the interest rates for savings accounts are currently not very appealing at all, offset mortgages allow you to both make the most of your savings and use them to take the edge off your mortgage debt as well.
Interest
They do this by taking your savings into account for the purposes of calculating interest on your mortgage. For example, if you have mortgage lending of £200,000 and savings of £50,000 that are linked to it via an offset remortgage, the interest you pay will only be calculated against the balance, i.e. you will only be charged interest on £150,000 of the mortgage lending.
Reduction
As well as potentially reducing the amounts that you'll pay back in your monthly bills, this can naturally also greatly reduce the total amount of time that it takes to pay the mortgage off.
The effect of this is that you effectively get better returns on your savings than what you would expect in a savings account at present, given the amount that you end up saving on interest payments on your mortgage.
Access
Another advantage to using your savings in this way is that, while they help to reduce the amount of interest you're paying on your mortgage, you can still use the funds at any time should you need them, so they're not locked into the mortgage deal in any way.
As well as linking your savings to the mortgage balance, with some offset remortgages you can also link any balance that you have in your current account, and this will also reduce the proportion of the mortgage that you pay interest on.
Discipline
One definite disadvantage to offset mortgages for certain consumers, is that you really need to have a disciplined approach to paying your mortgage payments, as you will make the best of the offset if you pay the mortgage off as early as possible.
Rates
Another possible disadvantage to some of the offset remortgage deals that you'll see is that they often don't have the best interest rates available compared to fixed remortgages and variable remortgages, so bear this in mind when comparing the available deals and make sure you get the best out of your funds.