Offset mortgages warning

22 July 2004
New advice warns homebuyers and remortgagers that offset loans may not be such a good option.

Savills Private Finance is advising anyone considering an offset home loan to bear in mind that they do not allow borrowers to pay off their mortgage early.

"Homeowners need to ensure that the mortgage they take is most suitable to their circumstances," advises Savills Private Finance's Tom Bland.

"Many taking out an offset mortgage mistakenly do so believing it is the best means for paying off their mortgage early. However, whilst offset mortgages have many great benefits, they are perhaps unsuitable for the majority of borrowers who would gain greater value elsewhere."

Offset mortgages are of course suitable for some people, particularly those who need a relatively small mortgage, but a big further borrowing facility which they feel they can repay rapidly.

They are also a good bet for people with fluctuating salaries. For example, salespeople or the self employed. The former may receive large amounts of commission, which can be used to reduce interest payments on the home loan, but borrowed back to subsidise income when only the basic wage is coming in.