Offset - How does it work?

RobHolyhead

Hi all,

Im thinkin about changing to an offset but i have no idea how they work, i have googled it but theres so much complicated jargon it really dosnt help, can anyone tell me basically how they work without all the jargon?

if it helps my current account balange usually hangs around £500 and i put £240 in to a savings account every month however i only started that this month!

Would it be worth it and what does it actually go on?

Thanks

Rob

Thrugelmir

There are different types of offset mortgages. Some lenders allow overpayments that can be withdrawn at a later date. Others allow a "savings" account facility which can be used at any time.

However all use the same basic principle. Money that is desposited in the offset earns interest at the same rate as is paid on the mortgage. The interest earnt is credited back to the mortgage normally a monthly basis. The net effect is to reduce the term of the mortgage.

Upside of an offset is that your savings earn a good rate of interest. As no tax liability arises on the interest.

You need to read the term and conditions of every product as they do differ. However having access to reserve funds whilst earning a good rate of interest is useful, particularly if you have flutuating income.

Hope this cuts through the jargon and simpliflies matters a little.

honestash

help needed here
sibling going to but flat i will give lumper and leave her with 45k mortgage , can i get an offset mortgage ?
i would willingly leave 45 k in an account so no interest is due
then for 5 yrs we could pay say 300 p/month and reduce mortgage by 18k ish so in 5 yrs only got a 27k mortgage

is this feasable?