What Are Offset Mortgages?

So what are offset mortgages then? Well, the basic premises of offset mortgages are mortgages that work alongside a lump sum of money. Lenders need security to lend money, a way to be sure that if you cannot pay back your loan they have something to recoup their loses. Usually this is the house itself - if you do not pay your mortgage, you lose your home. The lender sells the property and gets its money back. The rate also defines how much risk they are willing to take - the lower the rate, the more the trust. But what are offset mortgages then and how do they work? They are mortgages where part of the risk is offset with a lump sum, so you can get a lower rate.

To illustrate what offset mortgages are, an example is needed. A regular mortgage of £100,000 may be at 6.5%, this means you would have to repay £541 a month. But an offset is different - an offset mortgage of £100,000 at 6.5% with an offset amount of £20,000 means effectively you are only paying a mortgage of £80,000 at 6.5% which is only £433 a month. The lender has that £20,000 so is willing to offer a lower amount. And the more you offset, the lower the repayment will become - another £5000 offset would mean a further monthly saving of almost £30 on the mortgage example. So what are offset mortgages? They are mortgages that can save you money each month.

But why bother offsetting the money when you could just invest the money into your home from the start? Well offsetting the amount allows you to get hold of the money whenever you like - of course if you spend more of the offset amount your monthly rate will rise. So if things get tough, you have a nest egg to take care of you. So what are offset mortgages? They are mortgages that can help you when times are tough. But the more money you offset, the more you save and the more you can invest - it's exponential, so you actually begin to earn money as you save. What are offset mortgages? They are the only loan that will keep making you money.

Now you know what are offset mortgages and you have a lump sum that you want to work for you, talk to a mortgage broker about taking out offset mortgages. What are offset mortgages? They are the mortgages that work with your money, save you money and help you earn - why wouldn't you choose one?

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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 - Mortgage Strategy Supplement April 2007. **Source - Mortgage Strategy April 2007: There are now around 30 offset providers. ***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.