Pay Your Mortgage Off Early With An Offset Tracker Mortgage

With the Bank of England's interest rates being volatile at present it may be time to consider an offset tracker mortgage and repay your mortgage early. Who knows where interest rates are going? you can get varying opinions from different financial analyst - who is right, who is wrong? so looking for an offset deal might save you a lot of money in the long term*. An offset tracker mortgage offers the potential for big savings on your mortgage.

An offset tracker mortgage is available at an interest rate that 'tracks' the Bank of England's base rate. That means the interest rate will be a certain percentage above the base rate and will rise whenever the base rate rises. It will also fall when the base rate falls. Apart from that an offset tracker mortgage has all the flexible features that borrowers have come to expect.

With an offset tracker mortgage, borrowers can offset credit balances against mortgage debt by linking their current account, savings account and mortgage account. This can be done through an offset tracker mortgage which keeps the accounts separate or a current account mortgage, where borrowers have one account with a borrowing limit which is like a large overdraft. Like other offset mortgages, an offset tracker mortgage charges interest daily, so when credit balances are high, people pay less interest. Mortgage payments remain the same, though, so people with an offset tracker mortgage effectively overpay each month.

What borrowers should look for, with an offset tracker mortgage, is the period of time that the tracker rate is offered. With some mortgage products, the tracker interest rate is offered for two years, but with others the tracker rate can be offered for ten years or more. Long term trackers seem to be coming into vogue, which may be good news for some borrowers. However, it's worth remembering that mortgage payments on your offset tracker mortgage may increase so take that into account when deciding if your offset mortgage provider is offering a good deal.

Flexible Offset Tracker Mortgages

An offset tracker mortgage is part of the family of flexible mortgages, which means that people can tailor their mortgages to suit their finances, subject to the conditions of the particular mortgage offset deal. Borrowers can take payment holidays, can overpay and can underpay (though usually only after they have overpaid). However underpayments and payment holidays could increase the mortgage term and/or the total amount payable. They can also make lump sum payments and can repay early without penalty. The combination of flexible features and daily interest means that someone with an offset tracker mortgage could repay the mortgage as much as eight years early - and could save thousands of pounds' worth of interest**.

For this reason, an offset tracker mortgage is especially suitable for people whose finances do not follow a set pattern. Self-employed people and other people with variable income may find that the flexible features suit their earning pattern. Other people might also benefit from this flexibility, so it could be worth speaking to our offset mortgage advisers before you decide on your offset tracker mortgage.

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© 2007 and 2008 Offset Mortgage Centre | Terms and Conditions | Privacy Statement | We don't charge a fee for admistration of an offset mortgage. The Offset Mortgage Centre is the trading name of The Mortgage Broker Ltd, (a whole of market mortgage broker), which is an appointed representative of Home of Choice Limited, which is authorised and regulated by the Financial Services Authority | Your home may be repossessed if you do not keep up repayments on your mortgage. *Source 22 April 2007: Interest rates may be heading for 6 per cent **Source Barclays Bank: Calculation based on an offset tracker product; repayment mortgage of £100,000 over a 25-year term that has been offset with £20,000 savings, resulting in a reduction in mortgage term of 8 years and 8 months or a saving of £44,867 in overall interest. Calculation assumes balance remains constant throughout the life of the mortgage and that the mortgage loan and savings balance will vary. Outcomes will be either a reduction in payments or a reduction in mortgage term. No interest is paid on balances offset against the mortgage. Typical rate is 6.45% (variable).