What Is An Offset Mortgage? The Professionals Explanation

Before you can realise what is an offset mortgage, you must realise what offset means - financially, offset means to consider some existing money when calculating a debt.

Basically, it's making your money work against your debt, intelligently, basically.

In real terms, offset means a lender puts your money, in current accounts or savings accounts, up against your mortgage. For example, if you have a £200,000 mortgage, but have £15,000 in savings, then the mortgage interest will only be calculated against the £185,000 remaining after the £15,000 is offset. So what is an offset mortgage? It's the option for those who know the importance of using the money you have saved.

So from day one, the interest is calculated from a £185,000 debt. But on day two, if you take out £5000, then the interest will be calculated from a £190,000 debt - you have decreased what is offset against the mortgage, so the rate rises. And as the days go on throughout the month, the interest is calculated after offsetting the amount in the accounts - if spend less money, the interest stays down, simply. So what is an offset mortgage? It's the option for those who spend wisely and know how important savings are.

But of course, if you pay in some money rather than splash out, the interest rate will fall. So if on day four, you deposit £10,000, then the interest is calculated against the new offset debt that remains, rather than the amount the day before. Just by depositing savings, you could be saving more than you think. So what is an offset mortgage mean to you? It's a mortgage that makes our money go further.

And naturally, if you pay in money throughout the month, the interest rate will continue to drop. Taking out an offset mortgage will give you a great feeling - knowing that all that money you have worked for and saved up over the month is being used constantly to make everything seem easier. So what is an offset mortgage? It's a mortgage that works as hard as you do to minimise your debts, every day.

Also, if you continue the same payments every month as you save, you will effectively be spending too much on your mortgage. That is the key helping you offset - it's a mortgage that helps you pay off your debts faster. For example, if after the first month you meet the payments for a £185,000 mortgage, and choose to continue to pay the same amount every month, you would be paying too much interest if you have offset the mortgage with further savings. So what is an offset mortgage? It's a mortgage that can be paid off faster.

And as you pay off your debts, you are improving your credit rating and giving yourself incentives to save. Offsetting rewards constantly - and the more that it rewards, the better you will feel. So what is an offset mortgage? It's a way to control your mortgage, instead of your mortgage controlling you. It's a way to make sure you have that extra cushion if things go bad, and most of all it's a way of feeling good about your finances every day. What is an offset mortgage? It's a mortgage that could be the right financial choice for you.

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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: Interactive Investor 4/4/07 - The average credit card annual percentage rate for purchases is around 16.1 per cent. **Source: Datamonitor 16/4/07, The Offset mortgage market currently occupies a 10% share of the total market. ***Source: Mortgage Strategy Supplement - April 2007. ****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.