If you live in the United Kingdom and are looking for a flexible mortgage, you might want to consider taking out an offset mortgage.
Offset mortgages are vary from a traditional fixed-rate mortgage because borrowers can reduce the interest rate that they are charged by offsetting a balance against a mortgage debt. For example, if you have a mortgage balance of 200,000 GBP and have a credit balance of 50,000 GBP, you’re only charged interest on 150,000 GBP. Some lenders make use of a single account for all transactions, which is sometimes referred to as a current account mortgage.
Lenders generally tend to set a credit limit at the beginning of a mortgage and allow borrowers to take out credit up to the limit. The limit can be periodically reviewed by creditor as the borrower’s credit rating changes. The lender can sometimes place restrictions on a mortgage during the end of repayment to make sure that the borrower repays. Some lenders allow full drawdown up to the end date of the mortgage where the loan must be repaid. This can tend to create problems for borrowers that aren’t disciplined or are approaching retirement. Sometimes lenders won’t renew a loan term for a borrower, sometimes on the grounds of the borrower’s age.
Other lenders make use of multiple accounts. Typically, there is a mortgage account and a deposit account. A lender allows multiple accounts for credit balances and in some situations for debit balances. These accounts allow the borrowers to split their money into different accounts based on the purpose. All of the accounts offset the mortgage debt.
In the United States, flexible mortgages gained popularity during the housing bubble in 2006 and 2007, however, they have become very rare since the housing market declined.
If you’re looking for more information about getting offset mortgages explained, there are a number of great resources that your creditor can provide.