2nd-Mortgage

A leading broker has advised people to choose an offset mortgage rather than dipping into their savings to pay for their home loan. An expert from the broker said that this would allow customers to pay off their loan quicker and would also offer them greater flexibility.

He went on to say that by choosing an offset mortgage, customers would then not only be able to pay off their home loan quicker but also have the back up of their savings should they ever need to use them.

In the United Kingdom, there are different types of mortgages to choose from, which include a mortgage that is a big success in Australia, from where it originated. It is called an offset mortgage. Basically, an offset mortgage use the interest earns from your accounts and current accounts against your mortgage interest; and as a result this reduces your overall mortgage repayments.

With offset mortgages, your mortgage account runs alongside all your other accounts, and the net balance for all the accounts is calculated, normally on a daily basis. The interest is then worked out on the overall total you have in your accounts. All the interest you have earned from your savings and current accounts goes straight into your mortgage account.
The interest rate payable on a mortgage is normally far higher than what your savings will earn in a current account. For example, the rate of interest your savings will earn in a current account may only be 1%, compared to the interest on your mortgage, which may be 6%. It’s a far more efficient to use the money in your savings to pay off the mortgage than it is to leave it in a low interest paying account.