Mortgages: There is another way

Many of us have a mortgage. We’re aware of rising interest rates and the impact these rises are having on our monthly repayments. Many of us also have savings and we’re aware that inflation is eating into the return we receive. It’s really hard to get a real return on your money right now.

If you have a mortgage and cash savings, have you considered an offset mortgage? With an offset mortgage, you can link your cash savings to your mortgage balance, allowing you to reduce the interest that you are being charged on your mortgage.

Advantages of an offset mortgage

• You could pay less interest on your mortgage
• This could allow you to either reduce your monthly payments or even repay your mortgage faster
• You can still access your savings, but you won’t pay any tax on savings in the linked savings account – this is pretty tax efficient for those of you paying income tax at 40% or 45%
• Some offset mortgages also allow you to link up your current account as well as your savings account or multiple savings account for greater savings

Disadvantages of an offset mortgage

• Offset mortgage rates can be higher than standard repayment mortgages
• They tend to be more beneficial to those with a decent amount in savings
• It is a restricted marketplace, so there are fewer lenders to choose from

If you are currently looking for a new mortgage and let’s face it, many of us are having to, don’t forget to throw offset mortgages into the mix to see if they could help you find an even better deal

If you do have savings and a mortgage but don’t feel an offset mortgage is right for you, you might want to consider using your savings to overpay on a standard mortgage rate each month. Alternatively, you could use your savings to pay off a lump sum of the mortgage and reduce the loan-to-value (LTV) on your property. The lower the LTV, the better the rates.

There are always options out there that are worth investigating. Whatever you do, always factor in your personal circumstances when making any decisions on your personal finances. And it’s sensible to take advice on these options. For those of you though that do have a mortgage and savings, offset mortgages are, in our opinion, a low risk and tax efficient way of reducing your mortgage, so are well worth a look.

As always Team SK is happy to listen to your queries and questions, so if you would like our help, do get in touch.