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Your home may be repossessed if you do not keep up repayments on your mortgage.
An offset mortgage allows you to combine your savings or current account balances to your mortgage, effectively reducing the amount of interest you pay on your mortgage. Not only could this reduce your monthly repayments but it can also reduce the overall term of your mortgage.
Offset mortgage products are available as both fixed rate and variable rate options. However, it’s worth remembering that due to the added flexibility of an offset mortgage, you can sometimes be charged a higher rates when compared to standard mortgage products.
How does an offest mortgage work?
An offset mortgage is sometimes referred to as a current account mortgage as they work in a similar way. You simply need to use the same lender/financial provider to hold both your mortgage account and specific offset current account and the money in your current account will be offset against your mortgage balance.
If you have a £200,000 mortgage and a savings balance of £50,000 then you will only be charged interest on the difference, so £150,000. If your savings account changes, then the interest will be changed accordingly to reflect this.
Lenders will often offer two different types of offset mortgages. First you can keep the monthly mortgage repayments the same for the term of the mortgage deal, and your mortgage term will be reduced. Alternatively, you could reduce your monthly repayments but the term of the mortgage will remain the same. Usually, you will need to decide which option to go for, but this can often be changed depending on your lender.
At Derngate Wealth Management, we believe that an offset mortgage is an effective way to make your savings work for you. It can be a good way to save money and reduce your mortgage term but whether an offset mortgage is right for you depends on your individual circumstances. Talk to a Derngate Wealth mortgage adviser today.CALL TODAY - 0800 612 9031