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- When Considering A Remortgage, Consider Swapping To An Offset Mortgage - 5 Reasons Why You Should
When Considering A Remortgage, Consider Swapping To An Offset Mortgage - 5 Reasons Why You Should
- By Marcus Selmon
- Published 12/24/2011
- Real Estate
- Unrated
Offset mortgages have been around in the UK for more than 20 years, but many people have steered clear of them because they think that they are difficult to understand . Another myth surround them is that they are only suitable for people who earn a lot of money, but this is not true.
Today however, people are beginning to realise that they are actually quite straightforward. You do not need to be affluent in order to gain from using an offset product, and that's why we've created this guide to show you how an offset mortgage can be great for you.
1. Pay Less Interest On Your Mortgage Balance An offset mortgage is a combination of a mortgage loan and a savings account. Any surplus income is paid into the savings account and is 'offset' against the mortgage. The interest is then only paid on the mortgage amount, minus the savings amount. So for a GBP200k mortgage, if you have a savings account holding GBP10k you only pay interest on GBP190k of the mortgage.
2. You Can Vary Your Repayments Offset mortgages are some of the most flexible mortgage contracts on the market. You can withdraw funds from your savings account whenever you like, just like with any other savings account. You can also take repayment holidays when things are tight.
Lenders also often let you over or underpay, which is an
excellent feature if your income varies, for example if you earn regular commission. It's also useful for the self-employed as it can be used in times of illness.
3. Adjustable Mortgage Term By using your savings to reduce the balance on your mortgage, your regular repayments will be reduced because you are paying less interest, but if you continued to keep the repayments the same even though the interest has reduced your mortgage term can be shortened.
That means that you can repay your mortgage more quickly and finally own every inch of the property that you live in.
4. Use Yours Savings To Benefit Your Financial Situation In the last three years, interest rates have been very low and so your savings won't have been earning you much in the way of interest. This means that savings accounts have not been quite so useful, but you can still put them to good use by having an offset mortgage as your savings will contribute to a shorter mortgage term.
5. Pay Less In Taxes to HMRC If you pay tax, you'll be due to pay tax on most savings accounts excluding ISAs and certain other investments. But something you may not know is that offset mortgage savings accounts are tax free, so you won't have to cough up for HMRC.
An offset mortgage is only advantageous if you use them as they are intended, and if you have no savings or no disposable income to save then there is little point in opting for one.
Today however, people are beginning to realise that they are actually quite straightforward. You do not need to be affluent in order to gain from using an offset product, and that's why we've created this guide to show you how an offset mortgage can be great for you.
1. Pay Less Interest On Your Mortgage Balance An offset mortgage is a combination of a mortgage loan and a savings account. Any surplus income is paid into the savings account and is 'offset' against the mortgage. The interest is then only paid on the mortgage amount, minus the savings amount. So for a GBP200k mortgage, if you have a savings account holding GBP10k you only pay interest on GBP190k of the mortgage.
2. You Can Vary Your Repayments Offset mortgages are some of the most flexible mortgage contracts on the market. You can withdraw funds from your savings account whenever you like, just like with any other savings account. You can also take repayment holidays when things are tight.
Lenders also often let you over or underpay, which is an
3. Adjustable Mortgage Term By using your savings to reduce the balance on your mortgage, your regular repayments will be reduced because you are paying less interest, but if you continued to keep the repayments the same even though the interest has reduced your mortgage term can be shortened.
That means that you can repay your mortgage more quickly and finally own every inch of the property that you live in.
4. Use Yours Savings To Benefit Your Financial Situation In the last three years, interest rates have been very low and so your savings won't have been earning you much in the way of interest. This means that savings accounts have not been quite so useful, but you can still put them to good use by having an offset mortgage as your savings will contribute to a shorter mortgage term.
5. Pay Less In Taxes to HMRC If you pay tax, you'll be due to pay tax on most savings accounts excluding ISAs and certain other investments. But something you may not know is that offset mortgage savings accounts are tax free, so you won't have to cough up for HMRC.
An offset mortgage is only advantageous if you use them as they are intended, and if you have no savings or no disposable income to save then there is little point in opting for one.
Marcus Selmon
Marcus Selmon writes for Just Commercial Mortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Marcus Selmon