With
an offset
mortgage you reduce your monthly interest
bill by setting your savings or, if you choose, your savings and
current account balances against your mortgage debt.
For some people offsetting is a difficult concept to grasp particularly
the current
account mortgage option and you shouldn't choose it if it
makes you uneasy. Offset mortgages tend to charge a higher interest
rate than ordinary discounted variable and fixed-rate loans.
So it isn't worth choosing this option unless you
have enough cash to really make a difference.
you'll get the most benefit if you have a substantial amount of
savings you can transfer into the offset account.
Using the cash in your current account will help too, but unless
you're highly paid this isn't likely to average more than a couple
of thousand pounds a month, so it won't make a huge difference.
Offsetting can be good for
•Committed savers
•Higher-rate taxpayers
•The self-employed
Offsetting tends to suit committed savers who don't want to lose
access to their cash permanently by using it to pay off chunks
of their mortgage.
It's also good for higher-rate taxpayers, who have least to lose
by foregoing savings interest.
And it can work well for the self-employed, who get paid gross
and need somewhere to stash their tax money for months at a time.
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