Whether a borrower is eligible for an Offset mortgage depends on several factors, including the property type (usually restricted to residential property, so no Buy to Let), credit score, Loan to Value (LTV) ratio, and loan terms. There are additional requirements for an interest-only Offset mortgage, too.
While many can benefit, Offset mortgages are particularly useful for certain groups. Most obviously, the greater the balance in the Offset savings account, the greater the benefit. Large lump sums from inheritance, bonuses, or pensions can significantly reduce the interest on the mortgage while leaving the money available.
Also, while those using an Offset mortgage don’t earn interest on the savings in an Offset account, they also don’t pay tax on the interest they save. For higher-rate taxpayers, particularly, an Offset mortgage could save more on interest repayments than they would earn in a savings account after tax.
Finally, Offsets can be a real boon for self-employed people, who often receive irregular income. Offsetting to lower monthly repayment bills can be helpful for them and enable them to keep cash ready for paying tax bills while putting it to work.
As with any financial product, it’s vital that borrowers seek advice to know if an Offset is the best choice for them. For some combining savings and debt reduction could offer that rare thing in these difficult times, the best of both worlds.