All advisers are telling people these days to ‘overpay, overpay, overpay’ – in this low rate environment many Brits have seen their mortgage rate fall dramatically and many have the capability to overpay on their loan. And no loan is better to overpay on than an offset loan – because the more you overpay on a flexible deal, the better rewards you receive:

1. Reduces outgoings
If you stick with your offset repayments, you will reduce the amount you have to pay on your mortgage each month – the more that is offset against your loan, the lower the rate of interest you have to pay. And it’s exponential, so each month of overpaying into your loan means another month of decreased outgoings.

2. Reduces the life of your loan
You can choose to either reduce the rate of your mortgage or you can choose to reduce the term of your loan. Offset mortgages are very flexible and allow you to save alongside or save directly into your loan. This means you can, if you wish, reduce the amount of time your mortgage has to run. We all want to have less debt for less time, and with offset overpayments that’s exactly what you can do.

3. Increases equity
As you reduce the term of your loan, you also increase the amount of your home that you will eventually own. If you save a huge lump sum next to your property, you have more equity to spend when it comes to selling up and moving on. In these days of reduced loan to value ratios, any extra money you have could be vital to moving onwards and upwards.

4. Improves credit score
Lenders always look at your credit history to determine your chances as a borrower, so the better behaved you have been with a debt, the better chance you have of getting a bigger and better debt in the future. Overpaying on a mortgage is about as well behaved as you can get, so the longer you overpay, the better your score and the more attractive you will be to a lender in the future.

5. More chance to clear future debt
Because you are increasing your equity as you pay more, you are increasing your reserves. Those reserves can be used in the future to help pay off a number of debts – cars, holidays, weddings, kids’ university fees – there is always something else to account for, and by overpaying, you give yourself the reserves and the ability to meet any big outgoings head on in the future.

To stay abreast of current trends, news and comment on offseting mortgages visit the Offset Mortgage Blog.