If you live in the United Kingdom and are taking out a mortgage loan, you may want to consider taking out an offset mortgage to reduce the amount of interest that you pay for on a loan.
Offset mortgages are different from traditional mortgages because borrowers can lower the interest they pay by keeping a checking or savings account with the same financial institution as their bank. The account balance offsets their mortgage debt and reduces the overall amount of interest that a borrower has to pay. For example, if you have a mortgage balance of 250,000 and have a credit balance of 50,000, you’re only charged interest on 200,000.
Some lenders make use of a single account that manages all transactions, which is sometimes referred to as a current account mortgage. Other lenders make use of multiple accounts, where a borrower has a mortgage account and a deposit account. Sometimes borrowers can have multiple deposit accounts to offset a mortgage.
There are some downsides to offset mortgages. They tend to charge higher interest rates than traditional mortgages. Offset mortgages can also put borrowers on variable interest rates which could be a bad deal of interest rates go up over the long term.
If you’re looking to take out an offset mortgage, you should shop around to make sure that you’re getting one of the best offset mortgages. Talk to multiple lenders and get at least three quotes on your mortgage. Make sure that the bank that you select is one that you find easy to interact with because they will also be holding your deposit account. Learn about the bank’s overall financial health and make sure that other customers have had positive experiences with the bank. You can also look for offset mortgages and all mortgages online through a number of services that provide mortgage quotes.