For people with cash savings, offset mortgages represent an ideal way to make your savings work for you – by reducing the amount of interest charged on your mortgage. Offset mortgages work by linking your mortgage with savings (and in some cases, current accounts) held with the same provider. The credit amount in your other accounts offsets the balance owed on the mortgage, meaning you get charged less mortgage interest – although it also means you won’t earn any interest on your savings.
This type of mortgage can be advantageous because by reducing the interest charged, you can save money over the longer term and even end up paying your mortgage off early. And because your savings are used to offset the mortgage and earn no interest, no income tax is deducted – this makes offset mortgages particularly beneficial for higher rate taxpayers.
The downside is that rates on offset mortgages are often higher than other types of mortgages, so if you have a smaller or highly variable savings balance it might not work out in your favour. Just Mortgage Brokers’ expert advisers can review your financial circumstances and help you to decide if an offset mortgage is right for you.