An offset mortgage would normally work in the following way:
- Your savings account, and sometimes your current account, would be linked to your mortgage
- Rather than earning interest on your savings, the amount of interest owed on your loan would be reduced
- For example, if you had a mortgage loan of £100,000 and savings of £5,000, you would only pay interest on £95,000
- You could have the option to make overpayments, underpayments or take payment holidays; you may also be able to draw money out of your mortgage
1 year offset mortgages could come with different types of interest rates, such as:
This would guarantee that your interest rate would stay at a fixed amount for a predetermined period.
Tracker mortgages are linked to the Bank of England base interest rate, and could rise or fall accordingly.
Standard Variable Rate (SVR)
The SVR is the lender’s basic interest rate without any type of discount; it is not fixed, so could move up or down.
There are many providers competing for your custom with regards to offset mortgage deals, so make sure that you get a few offers before committing yourself to such a serious financial commitment.