If you would like your mortgage designed so that it allows you to make early repayment of your mortgage then the Offset mortgage could be the right choice for you. An offset mortgage is widely advertised as a way for homeowners to pay off their mortgage ahead of time.

The essential principle of an offset is simple: You reduce the amount of debt by the amount of savings you hold. This means you will be paying less interest on the mortgage so more money will be earmarked to pay off the loan more quickly. It is not only flexible and tax efficient but over a 25 year mortgage this can save you thousands. Here’s how they works:

How they work

Most mortgage borrowers also have savings, even if they are small, and using this money to cancel out mortgage debt is very sensible.

Savers avoid paying tax on interest that their deposit account would otherwise have earned but because offset mortgage lenders calculate interest daily, every pound on deposit works hard to reduce the cost of the mortgage.

With interest only paid on the reduced mortgage balance this will have the same effect as overpaying a mortgage if you keep your monthly payments the same. No redemption penalties apply. The best bit of all is that you can still have access to all of your savings should you need them.

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