Offset mortgages are not as popular as they were in the past. The demand for these types of mortgages has reduced drastically because people aren’t as good at saving as they used to be. However, these mortgages are a fantastic option for customers who are able to put some money aside each month or if some money is inherited or used as a gifted deposit.
When you take out an offset mortgage, the lender opens a Savings Account at the same time which is linked to your mortgage. Whilst the Savings Account won’t gain any interest, the money ‘offsets’ against the mortgage balance, e.g. if you owe £100,000 on your mortgage and you have £18,000 in your Savings Account then you only pay interest on £82,000.
This means Offset mortgages are extremely flexible, and money can be put in until the mortgage is completely offset. Any money that is put in the account is instantly accessible so it’s an ideal place for your ‘rainy day’ emergency fund. The Savings Account saves interest on your mortgage and doesn’t attract tax on anything that’s put in there which is particularly attractive to higher rate taxpayers.
If there is a reason that a lump sum will soon be acquired such as a possible future inheritance then an Offset Saver can be a good place to deposit the money until what is decided to use it on. The same applies to any bonuses that are received through work.
Consequently, there are some negative factors because of the availability to these flexible features. Offset mortgages tend to hold slightly higher mortgages rates and fees than other mortgages. Therefore, if the flexible features aren’t been put to use then it’s best to go with a standard mortgage.
Customers who like Offset Mortgages tend to stick with them and are less likely to remortgage as opposed to other customers. These types of mortgages can sometimes be tricky to understand but are worth looking into with a Mortgage Advisor in Derby. Many people often plan to overpay their mortgages when they first take them out but don’t seem to get round to it, this is often due to being uncertain about paying too much off their mortgage so that little is left for future capital requirements.
So if this sounds familiar then it may be best getting in touch with a Mortgage Advisor in Derby to make sure that the right mortgage is obtained and fitting to the situation that is being sought after.