The Advantages Of An Offset Mortgage
BATTLECALL GUEST EXPERT: Peter Kenny, Loan
Officer
Offset mortgages are one of the newest types of mortgage around, and are
quite similar to current account mortgages. They are highly flexible, and if you
are looking for a mortgage then you should consider an offset mortgage. Here is
some more information on offset mortgages and how they can be beneficial:
What Is An Offset Mortgage?
An offset mortgage is a new type of highly flexible mortgage. It is similar
to a current account mortgage, which puts your mortgage and all other spending
in one account. However, with an offset mortgage the money you have is split
into separate accounts or 'pots', which are linked for interest calculation.
Your wages, savings and other debts are linked together and the interest rate is
kept the same on everything. Any money that you earn or savings that you have
can be used to pay back the mortgage more quickly.
Advantages Of Offset Mortgages
Offset mortgages can save you a lot of money if you use them wisely. This is
because you can use items such as savings to pay back the mortgage more quickly,
and effectively reducing the interest paid plus avoiding tax on savings. Offset
mortgages are also great because of their flexibility. You can underpay at some
points or even withdraw money from the mortgage and then make large overpayments
at no extra charge. This sort of mortgage is great if your wage varies from
month to month. Also, with daily interest rate calculation means that any money
in your accounts will reduce the amount of money you owe, and therefore reduce
interest.
What Are The Disadvantages?
There are also some disadvantages to offset mortgages. Firstly, it is hard to
keep track of the money that you are spending when all the accounts are linked.
Because there is less of a need to make certain repayments each month, you often
overspend and put yourself further into debt. Careful money management is
required to make the most out of an offset mortgage. Furthermore, the interest
rates on offset mortgages are usually higher than traditional mortgages. You are
paying more for the level of flexibility that you are being given.
Who Should Get Offset Mortgages?
Offset mortgages are best for people who have a fairly large amount of money
in their current or savings account, as these will help to pay off the mortgage
quickly. Also, with the higher rates they are not advisable for people on a
tight budget, or those who are poor money managers. Offset mortgages are used
best for people with high but unpredictable incomes. If you think that having a
highly flexible mortgage will suit your lifestyle and that you can spend your
money wisely, then an offset mortgage would be a good option for you. Offset
mortgages are still new, but there are more and more lenders offering offset
packages, and so the rates and terms are becoming more competitive. If you shop
around then you can find an offset deal to suit your needs.
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