Offset mortgages

There’s no shortage of mortgage types out there; fixed rate mortgages, low deposit mortgages and variable rate mortgages to name a few. But, what if there was a mortgage type that put your hard-earned savings to good use?

Designed to link your savings account to your mortgage balance, offset mortgages allow you to reduce the interest you pay and potentially shorten the term of your loan, all based on how much you’ve managed to save over the years. This type of mortgage can be especially valuable for first time buyers, homeowners looking to remortgage or traditional buyers who want to make their savings work harder.

At Everest Mortgages, we understand that the mortgage landscape can be confusing, so we’re here to help. We’ll help you to find an offset mortgage that rewards you for your savings balance, giving you more control over your mortgage costs.

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What is an offset mortgage?

Unlike a standard mortgage, an offset mortgage connects your borrowing with a linked savings account. Instead of earning interest on your savings, the money in the account is used to offset the mortgage balance that interest is charged on. By combining your mortgage and savings, an offset mortgage can reduce the interest you pay, whilst keeping your savings accessible.

Though offset mortgages can seem complicated at first, they’re actually quite simple. The more money you have in your offset savings account, the less interest you pay on your mortgage. This can significantly reduce the total interest paid on your mortgage, even shortening the overall mortgage term.

How does an offset mortgage work?

When you apply for an offset mortgage, your chosen lender will calculate the interest based on your outstanding mortgage balance, minus your savings in the linked account. For example, if you have a mortgage balance of £200,000 and offset savings of £50,000, the interest is only charged on the difference. In this case, that’s £150,000, which is significantly less than charging interest on the full mortgage balance.

Some lenders even allow family members’ savings to be included in the offset amount, which can make it easier for first time buyers or those with smaller savings to buy a home.

Who are offset mortgages best for?

A lot of buyers can benefit from offset mortgages, and this includes first time buyers. If you have a savings pot, an offset mortgage can help to reduce interest on your borrowing, whilst making sure you still have access to your funds.

Current homeowners and general buyers can also benefit from offset mortgages, especially those who want mortgage flexibility and to make the most of their existing savings pot.

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Reasons to choose an offset mortgage

When you look at the benefits of getting an offset mortgage, it’s easy to see why it’s a popular approach to buying a property.

With an offset mortgage, the interest you pay is reduced without you having to make any permanent overpayments.
Offset mortgages give you the chance to potentially shorten the term of your mortgage and enjoy lower monthly payments.
You maintain easy access to your savings, in case you need them in an emergency.
As you don’t earn interest on the savings being used for an offset mortgage, there’s no tax to pay on it.

Are there any downsides of an offset mortgage?

There are a few downsides to an offset mortgage, though none take away from the benefits. For example, savings in your offset mortgage account don’t earn any interest, and some lenders limit the amount of savings you can offset. It’s also important to remember that if you withdraw funds, your mortgage payments may increase.

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Help for landlords: Offset buy-to-let mortgages

Offset mortgages aren’t just for homeowners, remortgagers and first time buyers, they can also be used for buy-to-let properties. By linking your savings to your investment property mortgage, you can reduce the interest, potentially increasing your rental profit.

This can be particularly useful if you’re a landlord with a cash reserve or if you receive rental income that can be temporarily offset against the mortgage. With an offset buy-to-let mortgage, you maintain access to your savings, while lowering overall interest costs.

Streamline the process with an offset mortgage broker

Offset mortgages are more complex than traditional mortgages, and not every lender offers them. By working with an expert mortgage broker, such as the team here at Everest Mortgages, you can relax knowing that you’re getting the right offset mortgage for your upcoming property purchase.

Access to specialist lenders

Not all lenders provide offset mortgages, but we know who does and who offers the best rates.

Bespoke mortgage advice

We can calculate how much interest you could save and whether offsetting your mortgage makes sense based on your savings and financial goals.

First time buyer guidance

Navigating the property market as a first time buyer can be daunting, so we’ll let you know if an offset mortgage is right for you.

Remortgage strategy

If you’re an existing homeowner looking to remortgage, we can help you to switch to an offset mortgage and optimise your interest savings.

Stress-free process

With us helping with the paperwork, deadlines and lender side of things, the risk of delay, declined applications and disappointment is reduced.

At Everest Mortgages, we will guide you through the process of getting an offset mortgage, ensuring your savings work for you and helping you to take the next step in your property journey.

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