But it's only worth doing if you have enough cash to make up for
the fact that these loans tend to come with a higher interest
rate than ordinary mortgages.
And that means keeping an average offset balance of
a good few thousand pounds.
that's why offsets tend to suit committed savers, the well off
and the self-employed (who save their tax).
• A £100,000 mortgage
and a £20,000 offset balance
A basic-rate taxpayer with a £100,000
25-year repayment mortgage at 6.25 per cent interest could clear
it six years early by offsetting £20,000 of savings.
Taking into account the interest they would lose by not putting
the cash into a market leading deposit account paying, say, 4.8
per cent after tax, and that they may be paying around 1 per cent
more than with another type of loan, they could still be more
than £12,000 better off over their mortgage term.
A higher-rate taxpayer could save almost £22,000 over
the same period.
• A £100,000 mortgage
and a £10,000 offset balance
A basic-rate payer offsetting £10,000 might end up almost £2,000
better off.
• A £100,000 mortgage
and a £5,000 offset balance
A basic-rate payer offsetting just £5,000 could actually be almost
£5,000 worse off.
But remember, these figures apply only to this exact
scenario if you're considering offsetting, it's vital that you,
or your mortgage adviser, do the sums for your particular circumstances
very carefully.
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