Typically, an offset mortgage would work in the following way:
- Your mortgage would be linked to your savings account
- Some providers may also allow linked current accounts, unsecured loans and credit cards
- By sacrificing earning interest on credit balances, you would reduce the amount of interest you would have to pay on debit balances
If for example had a mortgage of £225,000 and savings of £50,000, you would only pay interest on £175,000 of your mortgage loan, allowing you to safe a significant amount in the long term.
It is also important to remember that there are providers who sell different types of offset mortgages. It is important to remember that the best deal on an offset mortgage for one customers, may not necessarily be suited to another, the best offers depend a great deal upon the customers circumstances.
The most common variations of an offset mortgage are:
Fixed rate mortgages, that guaranteed fixed interest rates for a set period of time
Tracker mortgages, that have their rates adjusted according to the Bank of England’s rates
Standard variable rate mortgages, that may have their rates adjusted according to the lenders policy.