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Offset mortgages – an option worth considering


23 May 2023


Mark Alexander

Couple on offset mortgages

When it comes to buying a home, one of the biggest financial commitments you will make in your life, there are various options for financing your purchase. One such option is an offset mortgage.

Fairstone mortgage adviser, Mark Alexander, explores what an offset mortgage is, why it could be an option for you, and how to go about setting one up.


What is an offset mortgage?

An offset mortgage is a type of mortgage where the borrower’s savings and current accounts are linked to the mortgage. The balance of these accounts is then offset against the mortgage debt, reducing the amount of interest paid. For example, if you had a mortgage of £200,000 and savings of £50,000, you would only pay interest on £150,000.


Why could an offset mortgage be an option for you?

There are several reasons why an offset mortgage could be an option worth considering:


1) Reduce the amount of interest paid

By offsetting your savings against your mortgage, you could potentially save thousands of pounds in interest payments over the life of your mortgage. This is because interest is only charged on the outstanding balance of your mortgage, so the more savings you have, the less interest you will pay.


2) Flexibility

Most offset mortgages offer flexibility in terms of making overpayments or underpayments. This means you can pay more than your required monthly mortgage payment when you have extra cash, or pay less when times are tough. This can be a useful feature for those with fluctuating incomes or who are self-employed.


3) Tax benefits

Unlike with regular savings accounts, you don’t pay tax on the interest earned on your savings when they are offset against your mortgage. This is because the interest is not considered income, but rather a reduction in the interest charged on your mortgage.


How to set up an offset mortgage

While it’s possible to set up an offset mortgage on your own, it can be a complicated process, especially if you’re not familiar with the mortgage market. That’s why it’s often a good idea to speak to a mortgage adviser who can help you find the right offset mortgage and guide you through the application process.

If you’ve decided an offset mortgage is right for you, here’s how to get started:


1) Find a mortgage adviser

Arrange an appointment with a regulated mortgage adviser. As the number one rated wealth management firm on Trustpilot, you can rest assured you are in safe hands with Fairstone. Book a meeting with a Fairstone adviser today.


2) Discuss your needs and goals

When you meet with your mortgage adviser, be prepared to discuss your needs and goals. This will help your adviser to understand your financial situation and recommend the right offset mortgage for you. You should also provide information on your income, expenses, and any other financial commitments you have.


3) Compare offset mortgage products

Your mortgage adviser can help you compare different offset mortgage products and their features, such as interest rates, fees, and flexibility. They will also be able to explain the benefits and drawbacks of each product and how they suit your specific needs.


4) Apply for the mortgage

Once you have chosen an offset mortgage product, your mortgage adviser will help you with the application process. This will involve providing your personal and financial information, such as proof of income and identification.


5) Link accounts

Once your mortgage has been approved, your mortgage adviser will help you link your savings and current accounts to your mortgage. They will also help you transfer the funds you want to offset against your mortgage into your linked accounts.


6) Manage your accounts

Finally, your mortgage adviser will help you manage your linked accounts and make sure you are getting the maximum benefit from offsetting. They can advise you on how to maintain the benefit of offsetting and how to avoid dipping into your savings.


If you’re considering an offset mortgage, get in touch with an adviser today to guide you through the process and ensure you get the best deal for your specific needs.

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