Offset Mortgages – Understanding the Benefits
According to the results of a survey recently commissioned by the UK online direct bank first direct (firstdirect.com), currently 40% of homeowners don’t understand the basic idea of an offset mortgage and its benefits and a further 35% only roughly know how they work.
This worrying trend highlights how consumers may be missing out on saving money and reducing the term of their mortgage with just two in ten (21 per cent) seeing offsets as a way they can save money on their mortgage.
Findings from first direct show that swapping to an offset mortgage could cut down the length of a £100,000, 25 year mortgage by four years and save £24,232 in interest payments over the lifetime of the mortgage.
For instance, to follow are the main benefits of an offset mortgage with first direct
- customers don’t receive interest on their linked savings with an offset mortgage, instead reducing the amount of interest on their borrowings, therefore, there is no tax to pay on the savings
- ability to redraw funds at the same rate throughout the term of the mortgage, back to the original mortgage limit
- flexibility to make unlimited overpayments in either lump sums or regular payments
- no early repayment charges apply on tracker rate offset mortgages
- ability to move the mortgage to a new property without any new mortgage fees
- once a fixed rate is booked customers have six months to draw their mortgage down
- all accounts remain separate making it easier to keep on top of their finances
Source: first direct
