Our Offset mortgage is designed to help you get more from your money. It links your current and savings account balances to your mortgage, so the total amount of interest you pay on your mortgage could reduce. That means you could pay off your mortgage faster without increasing your monthly repayments. And what’s more, you will always have access to the money in your current and savings accounts.
When you link your current and savings account balances to your mortgage, the interest you pay is calculated on the difference between these balances and your mortgage balance.
For example, imagine the balance of your mortgage is £100,000. Without offsetting, monthly interest is calculated on that full balance. However, if for example you have £9,000 in your savings account and £1,000 in your current account, you could choose to link these balances to an Offset mortgage. That means the monthly mortgage interest would only be due on £90,000, which is the difference between your mortgage of £100,000 and the total of £10,000 in your linked accounts.
You still make a monthly payment based on the full amount of your mortgage - so it effectively acts as an overpayment and the interest you save reduces your loan faster as and lets you finish your mortgage early. You will not earn any interest on your savings or current account but you can access your accounts at any time.
There are lots of additional benefits to having an Offset mortgage with us. These include Flexible repayments, Payment holidays, Flexible borrowing, and Tax efficiency. Let’s take a look at each in turn:
Flexible Repayments allow you to make unlimited regular or one off overpayments to your Offset mortgage and you can do this whenever you choose and without penalty. So you could pay your mortgage off even faster if you’d like to.
Payment Holidays allow you to apply to make underpayments or take a payment holiday, this gives you more control of your finances. It can be great if your income varies over the year – but remember, interest will continue to be charged during this time and your monthly repayments may increase afterwards.
With Flexible Borrowing, you could borrow back up to your agreed borrowing limit – handy if you’re planning a few home improvements for example. Bear in mind that this would increase the mortgage balance on which you pay interest. And if you need to increase your borrowing limit, with our Offset mortgage, you could also apply to borrow more at your existing rate with no product or arrangement fee.
Offset mortgages can also be tax efficient. You won't pay tax on your savings because it's not earning any interest. This means that the effective savings rate can be much higher than the rate you could have earned on your savings if you hadn’t linked them to your mortgage.
We also offer a handy 'Money Manager' service to help manage your money more efficiently. Essentially it automatically moves money between your current and savings accounts to stop you going overdrawn. It also helps ensure you don’t keep too much money in your current account or lose out on savings interest if your balance exceeds your mortgage amount.