Flexible Mortgages - what is an Offset Mortgage?

An Offset Mortgage is a type of flexible mortgage.  Put simply,  you have a mortgage and an account, maybe savings account linked to the mortgage.  That means if you have for example a £100,000 mortgage and say £10,000 in savings the interest for the mortgage is not calculated against the £100,000 owed but £90,000 as the £10,000 helps reduce the mortgage debt. 

Effectively you pool all you savings and earnings into one account, so instead of paying say 6% on your mortgage, earning 4% on savings and .1% on current account it is all pooled together so the offset mortgage calculates the current mortgage loan minus the pooled funds, calculating the interest due on a daily basis.  Essentially the customer can make more from this than they would from their traditional savings/current accounts.  Also through this model your savings account is regarded to have nothing in it, so there is no tax to pay on those savings.

This type of flexible mortgage can be a very good option for the self employed, as all payments and build up of due tax payments can be built up in the account. 

Flexible Mortgage (Offset Mortgage) cost. 

Originally these types of mortgage were quite expensive and not very common but more recently availability has increased and the interest rate can be very appealing.  If you want some free advice as to whether this type of product could be suitable for you and maybe a fuller explaination please contact me.