An offset mortgage lets you factor in your current and savings accounts, leveraging this against your mortgage to reduce the balance that mortgage interest is charged on. Your savings are ‘offset’ against the mortgage and, whilst none of this money is used to repay the mortgage, it is used to save you the cost of interest.

Offset mortgages work by reducing the amount of interest you pay on your mortgage. For example: you may have an existing mortgage of £200,000 and are paying an interest rate of 3%. You also have £20,000 in saving. You can offset this £20,0000 and pay only mortgage interest on the £180,000. The amount saved from this will usually be more than the normal interest the money would have accrued in your savings.

There are a huge amount of advantages to securing an offset mortgage for your property. These include: paying no tax on the interest that you save (compared to paying tax on interest earned on a normal account), finishing your mortgage sooner, making lower monthly payments, supporting family and friends by contributing your savings to their mortgage, saving more interest than earned traditionally in a savings account, retaining easy access to savings.

There are many situations in which an offset mortgage will be financially beneficial. However your savings that you link won’t earn interest whilst they’re offset for the mortgage, so if you rely on the income of your savings interest, then an offset mortgage may not be suitable for you. Similarly, if you withdraw your savings then your mortgage payments will rise – making it unsuitable for someone who may need to rely on their savings to live from.

Offset mortgages are ideal for supportive relatives to help their loved ones get a foot on the property ladder. The savings don’t have to be from one person directly and they can come from multiple accounts not just one lump sum. You can contribute your own savings to an individuals’ mortgage, acting in a similar role to a guarantor. You’ll still have full access to your savings, risk free.

At Hawke FS, we understand that offset mortgages are one of the least-known and understood mortgage offerings on the market, which is why our tactful consultants work exhaustively to ensure that you understand the process and its benefit. You can get your policy set up with immediacy – simply contact our advisors today and you’ll be sent an initial enquiry form.