Offset Mortgage

An offset mortgage gives the homeowner the ability to reduce the interest payments on their mortgage offsetting any credit balance they have against the debt of the mortgage. If the mortgage borrower has a mortgage balance of £150,000 with a credit balance of£35,000, then interest is only charged on the balance of £115,000.

Basically the more savings you have offset against your mortgage debt, the more you save. The term to which you pay the mortgage can stay the same with you saving money every month, or you have the alternate option of paying more money due to the savings being made and pay of your mortgage much quicker. Some offset mortgage lenders have a single account for all transactions, sometimes called a current account mortgage or CAM.

Other mortgage lenders have the offset debt and credit spread over many accounts, with the debt amount left being the amount that interest is charged on. With the money still there to get your hands on, you can still use it if something unexpected crops up without any penalty. The interest on offset mortgages is calculated daily, unlike many standard mortgages, meaning that any money you have in your accounts saves interest paid on your mortgage.