The offset mortgage is a relatively new kid on the block,
and has taken the industry by storm so far. Although it is nowhere near catching up the traditional favourite, the repayment ( life insurance ) mortgage, it has proven to be a strong up- -and-coming contender. That's why virtually all lenders now offer an offset mortgage as part of their portfolio.
A recent study carried out by Abbey clearly demonstrates the real selling point of the ( pet insurance ) offset mortgage. It actually gives you the opportunity to pay your mortgage off early, thus saving you thousands of pounds. The study showed that by saving just £3 a day, a mortgage of £180,000 at 4.99% could be cut short by three and a half years, with a saving of almost £22,000.
So in basic terms, if you make a sandwich every morning rather than buying lunch at the local shop, then you could save £22,000!
At first, the offset mortgage was considered to be suitable only for those with ( insurance ) large savings. Of course, having savings helps immeasurably as it means you pay a lot less in interest. But all you really need is a willingness to save and to put in a little extra effort to overpay as and when you can.
The offset mortgage works by linking to a savings account and with many, but ( life insurance quotes ) not all lenders, a current account. The interest is calculated daily so if you get paid a salary of £1500 for month for example, then as far as the interest calculation is concerned, the amount will be less for as long as that extra is sitting in the account.
There is disagreement within the industry, for example David Hollingsworth, ( secured loans ) spokesperson for London & Country Mortgages, warns: “Offset mortgages carry higher rates of interest, so you need to be able to make up the difference.” Whereas a spokesperson from First Direct said: “You don't need a great lump sum. Just a couple of thousand pounds chips away at your mortgage”.
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