Information On Offset Mortgages For UK Home Buyers
A few lenders will allow you to offset savings held with the same bank against your mortgage, which can help to lower the amount you pay each month in interest by effectively reducing the amount you have borrowed.
By having a savings account linked to your mortgage you can reduce the payments you have to make, and by overpaying you can then reduce the term of your mortgage. For example, if you have borrowed £200,000, but have £50,000 with the bank in savings, then you will only pay mortgage interest on £150,000. But you will not be paid interest on your savings, so if you could get a better rate after tax than you are paying on your mortgage, it may be worth rethinking.
If you want to redeem your mortgage before the end of the term, you are likely to be charged an exit penalty, so take this into account if you are planning on moving your mortgage to another provider who perhaps has a lower rate. Is it really going to save you money when you take the penalty into account?
If you have got extended redemption tie-ins, then you may be charged an exit penalty after your deal has come to an end, so usually it is best to try and get a deal without extended tie-ins. If you are tied in after your deal has come to an end, you will usually be stuck on the lender’s standard variable rate, which is often much more expensive than other deals that might be available elsewhere.