Offset mortgages are a relatively new product in the world of home buying but even so they are already a popular choice. Below you’ll find a selection of the frequently asked questions regarding offset mortgages so you can see if this type of product is suitable for you.

What is an Offset Mortgage?
An offset mortgage uses the interest that you make from your savings to offset the interest being charged on your mortgage. This means that the payments you make on your mortgage are used to pay off the capital and not the interest.

Are my Savings Safe?
An offset mortgage doesn’t touch the balance of your savings so your money is quite safe. It is just the interest that is taken to pay the interest being charged by your mortgage provider.

How Much do I Need to Have in a Savings Account?
The interest from any amount of savings can be used so there is technically no lower limit. This type of mortgage is most beneficial though if you have sufficient savings to generate at least the amount of interest that you pay on your mortgage. If you don’t then the interest from your savings can be used to partially offset your mortgage interest but you’ll still have to pay the rest.

What are the Drawbacks of an Offset Mortgage?
The major drawback is that you don’t receive any interest on your savings and so you don’t see them grow as you’d like to. In addition, if you spend some of your savings then this will affect your mortgage payments as you’ll no longer be getting the level of interest that you were before you went shopping.

What are the Benefits?
There are numerous benefits to offset mortgages. The first is that you pay off your mortgage earlier than expected because you aren’t paying the interest on the mortgage loan. Your entire payment each month goes to paying off the capital. The second benefit is that the interest that you receive on your savings isn’t liable for income tax because it is being used to offset your mortgage. This means that all of the interest you earn goes towards paying your mortgage. Thirdly, you still have access to your savings should you need to use them. If you used your savings to pay off a chunk of your mortgage instead of just using the interest to offset then you’d no longer have them to hand.

Is an Offset Mortgage right for me?
This will depend on your individual circumstances. If you have considerable savings in the bank and you want to pay off your mortgage early then it is an option worth considering. It is advisable to talk to a qualified and independent mortgage advisor who will help you with the figures.