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    • Your guide to mortgage valuations
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    • Introduction
    • 1st Time Buyers Mortgage Guide
    • 1st Time Buyer & Help to Buy
    • What is a Buy to Let Mortgage?
    • Buy to Let Mortgage Advice
    • Flexible Mortgages
    • Interest Only
    • Remortgaging
    • Repayment
  • Protection
    • Introduction
    • Do I need Income Protection Insurance?
    • Income Protection Advice
    • Why do you need Life or Critical Illness Insurance?
    • Critical Illness & Serious Illness Cover
    • ASU / Redundancy
  • Life Insurance
    • Introduction
    • Term Insurance Policies
    • Endowment Policies
    • Family Income Benefit
    • Guaranteed 50 Plus Life Cover
    • Whole of Life
  • Conveyancing & Solicitors
  • Surveys and Valuations
  • General Insurance
    • Introduction
    • Buildings & Contents Insurance
    • Compare & Buy Online Now!
    • Landlord Cover
    • Rent Guarantee
    • Home Buyers' Protection
    • Home Emergency Cover
    • Commercial Insurance
    • Professional Indemnity
    • Public & Employers' Liability Insurance
  • Will Writing & Estate Planning
  • Other Loans & Services
  • Articles
    • Bank of England Rate Rise
    • Fee Free Mortgage Advice
    • Negotiating the best price for your new home
    • Freehold versus Leasehold
    • Why you need advice on mortgages
    • Ten terms first time buyers will want to know
    • Buying process and dealing with estate agents
    • Selling property and marketing options
    • Help to Buy or not Help to Buy: that is the question
    • New home or pre-loved?
    • Interested in interest only?
    • Are lifetime mortgages on the rise?
    • General Data Protection Regulation (GDPR)
    • Solicitors and conveyancers
    • Joint Borrower Sole Proprietor Mortgages
    • The 3% stamp duty
    • First-time buyer stamp duty relief
    • Offset mortgages: how they work and who they work for
    • Self-employed mortgages versus mortgages for those employed by others
    • Mortgages: debts versus deposits
    • House prices increase swiftest in North West compared to rest of UK
    • Transfer of Equity
    • 10 Pitfall Mortgages
    • Remortgages versus product transfers
    • Limited Company Buy-to-Let Mortgages
    • Retirement Interest Only (RIO) mortgages and the new residential option between normal Interest Only and Equity Release
    • 2019 and our rate of interest predictions
    • Brexit and the property market 2019
    • Potential benefits of using a broker
    • The mortgage market: lenders and their existing clients
    • Mortgages and Relationships
    • Robo Advice: is it right for you?
    • Cheaper rates versus cheaper fees
    • Why online mortgage comparisons can be so vastly different
    • Affordability Calculators
    • Cashback Mortgages
    • Government Rent a Room Scheme
    • Government Marriage Allowance
    • The property market continues to move; and the North West is looking good
    • England letting fees banned and how this may affect you
    • Top credit file definitions
    • Understanding your credit rating
    • BTL, LTB, HMO & holiday let terms explained
    • Offset mortgages: term and payment reduction options
    • November 2019 Bank of England base rate
    • The general election candidates for the Chorley Constituency
    • 2019 year-end mortgage lending market
    • 2019 year-end house prices
    • Can we expect sub 1% mortgagee deals?
    • How is Brexit likely to affect 2020 mortgages and house prices?
    • Interest rates in the UK, Europe and beyond
    • How the Great British Pound is faring against Euro and US Dollar
    • Help to Debt (HTD) – the importance of good advice when it comes to making borrowing decisions
    • Bank of England January 2020 base rate meeting
    • Lender Dual pricing: what it means to the mortgage seeker
    • Direct rates offered through lender portals can be costly?
    • Bank of England cuts the base rate to almost zero
    • Buying, selling and moving home during the pandemic
    • Tightening credit conditions in the mortgage market
    • One in seven takes mortgage payment holiday
    • The property market reopens for business
    • Lenders reintroduce 90% mortgage deals
    • Turbulent times for lenders
    • Easing out of lockdown
    • First-time buyer demand surges but options are limited
    • Stamp duty scrapped on homes under 500k
    • Competition watchdog investigates developers over mis-selling claims
    • UK economy may need further stimulus says the Bank of England
    • Your guide to mortgage valuations
    • Your guide to mortgage surveys
    • A quick guide to interest rates
    • A quick guide to inflation
    • The state of the housing market at the end Of 2020
    • What to look for in the 2021 property market
    • Price caps revealed for Help To Buy Scheme
    • Are 95% mortgages coming back?
  • Enquiry Forms
    • Mortgage Enquiries
    • Protection Enquiries
    • General Enquiries
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  • Home
  • Offset mortgages: term and payment reduction options

Offset mortgages: term and payment reduction options

An Offset mortgage links your easily accessible Offset savings account to your mortgage.

Your savings offset the mortgage interest you pay meaning the mortgage interest rate you are charged is reduced.

You can either reduce your monthly payments or the mortgage term, whichever you prefer.

As an example, if you Offset a mortgage of £100,000 with savings of £25,000, interest will only be charged on the £75,000.

Who might they be suitable for?

They are worth considering if you can make regular monthly savings, however large or small the sum, and if you like the notion of either paying off your mortgage early or reducing your monthly payments.

What is the Offset benefit?

The Offset benefit refers to the mortgage interest you save on.

Using the Offset benefit to reduce the term of your mortgage

To reduce your mortgage term, keep making your monthly mortgage payments as agreed when you first took out your mortgage.

Whatever Offset benefit you have will decrease the remaining capital balance. And this lowers the overall mortgage interest you pay and subsequently reduces the time it takes to pay your mortgage off.  

Remember that the sum you save will be dependent on how you balance your mortgage and Offset savings account.

If you choose to reduce the term, your monthly payments will only be reassessed if there are any important changes.  

Using the Offset benefit to reduce your monthly payment

Again, keep making your monthly mortgage payments as initially agreed.

Each month, your payment would automatically be reduced by the amount of the previous Offset benefit.

Whilst your mortgage term will remain the same, your payments will reduce as you pay less mortgage interest every month. This again depends on how you are balancing your Offset savings and mortgage.

It’s important to note that if the interest rate goes up, your monthly payments are likely to, too.

And note too how your Offset savings won’t be earning interest as it’s offsetting the interest on your mortgage. That said, there’ll be no income tax liability on those savings, either.  

The fact that interest isn’t paid on your Offset savings means that it won’t count towards your Personal Savings Allowance.

More money in your Offset savings account than your Offset mortgage?

In this instance, it’s probably worth moving some of your savings into a different account which will pay interest as you’ll receive no Offset benefit on the additional sum.

If your Offset savings account holds the same sum you owe on your mortgage, you’ll still need to keep up the capital repayments monthly.

If your Offset savings account holds no money, you’ll receive no Offset benefit and you might want to think about whether an Offset mortgage is still the best option for you.

What if you move?

You should be able to move and transfer your Offset mortgage if you want to.  

Overpayments

You can make small, impromptu overpayments, larger lump sum overpayments or regular overpayments. Charges may apply so you’d need to be aware of this.

It’s important to note that once the money has been transferred to your mortgage account, it can’t be transferred back and is subsequently inaccessible from then on. So, if it’s likely you’ll be needing that money any time soon, you’d be better to leave it in your Offset savings account.     

Here at Euxton Mortgage Market, we are always happy to help advise on the options that are available to you and the deals that will be most suitable for you. Call us today for more information.

Company address: Euxton Mortgage Market, Hearle House, 5 East Terrace Business Park, Euxton Lane, Chorley, Lancashire, PR7 6TB
T: 01257208946 F: 01257208947 Email: info@euxtonmortgagemarket.co.uk

Euxton Mortgage Market are independent mortgage advisers covering Euxton and the surrounding areas, including: Leyland, Bamber Bridge, Farrington, Lostock Hall, Longton, Adlington, Charnock Richard, Croston and Rivington.

Adrian John Wood, trading as Euxton Mortgage Market, is an appointed representative of HL Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.

*Some of these products are not regulated by the Financial Conduct Authority.

Adrian John Wood is entered on the Financial Services Register (www.fca.org.uk/register) under reference 682490.

H L Partnership Limited is entered on the Financial Services Register (www.fca.org.uk/register) under reference 303397.

The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK.

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