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Offset mortgages are a type of interest rate deal that links your current account, savings account or credit card to your mortgage loan with the aim of reducing the amount of interest you pay and decreasing the overall size of your mortgage.
Your savings are combined with your debt and the interest you earn on your savings is used to reduce the amount of interest you pay when repaying your mortgage loan, potentially saving you a significant amount of money. The more savings you have, the more interest you are likely to earn, and the interest accumulated on your savings is used to reduce the interest on your mortgage loan.If your mortgage loan is £150,000 and your savings are £50,000, you will only have to pay interest on the first £100,000 of your mortgage loan.
Offset mortgages are generally considered to very flexible, and may enable customers to:
- Make as many overpayments as they want to reduce the overall size of their mortgage
- Make underpayments in times when they need to dip into their savings
- Take advantage of a drawdown facility allowing them to withdraw money from their mortgage account
- Take payment holidays if necessary
Offset mortgages could suit you if you are a person:
- With substantial savings that can be put to use
- Who has a cash ISA
- In a higher tax bracket
- With buy-to-let properties
Alternatively if you require mortgage advice use the whole of market mortgage advice service below: