A 5 year offset mortgage is a type of interest rate deal where your savings account, current account, or credit card will be linked to your mortgage to reduce the overall amount of interest you pay.
For example, if you take out a mortgage loan of £200,000 and you have £80,000 savings, you will only have to pay interest on £120,000 of your mortgage.
If you have savings, are self employed, or rely on commission or an annual bonus, this may be the best type of interest rate mortgage deal for you because the offset mortgage is flexible and the more savings you have, the less interest you pay.
You will still have easy access to your savings if you choose this type of interest rate mortgage deal. You may also be able to take payment holidays depending on the circumstances, the flexibility these plans is often what attracts a great deal of customers. A 5 year offset mortgage could benefit you if you:
- Are a high rate taxpayer
- Have buy to let properties
- Have a significant amount of money saved
- Have irregular income (rely on bonuses and commission)
Take a look at our mortgage comparison table above for a list of offset mortgages, ranging from 2 years to 5 years.
If you are not sure whether a 5 year offset mortgage is the right choice for you, you may wish to consider other types of interest rate deals:
- Fixed rate mortgage – the interest rate stays at a fixed rate which is set by the lender according to Bank of England base rates. When the term ends the interest rate changes to the lender’s standard variable rate.
- Standard variable rate mortgage – the interest rate is set by the lender who usually considers the Bank of England base rate when deciding the level of interest.
- Tracker mortgage – the interest rate traces the Bank of England base rate and could rise or fall accordingly.