It can be hard to find the best offset mortgage deal. There is a lot of information about offset mortgages on the internet and on the high street, but it can leave you feeling overwhelmed and confused about which is the best deal on the market.
What is a mortgage that is offset?
The balances in a borrower's mortgage account and/or savings account are linked by an offset mortgage. When interest from savings and/or checking accounts is used to pay down the mortgage, the mortgage should be paid off faster. A mortgage with an offset is also flexible because it lets you make overpayments, underpayments, and sometimes even skip payments.
An offset mortgage is not like a regular mortgage at all, and you can't just compare interest rates to find the best deal on an offset mortgage. Offset mortgages come in many different shapes and sizes, so you can choose the one that best fits your needs and situation. Because of this, you need to look at an offset mortgage deal as a whole before deciding which one is best for you. In 2006, about 170,000 offset mortgages worth GBP23.9 billion were sold, according to the Council of Mortgage Lenders (CML).
Many people who are looking for a new mortgage would be better off with an offset mortgage, but they only make up about 7 percent of the market. Most homeowners stick with what they know, which is usually a traditional mortgage. This is because many people find it hard to understand the possible benefits of an offset mortgage, such as savings every year, flexibility, and tax benefits.
An independent mortgage broker
To find the best offset mortgage deal for you, it's best to get help from someone who is trained and can give you unbiased advice, like an independent mortgage broker. As with all financial services in the UK, they are regulated by a separate group called the Financial Services Association (FSA). The FSA makes sure that companies follow the Principles of Business. For example, Principle 6 says that all customers must be treated fairly, and Principle 7 says that information must be clear, fair, and not mislead. So, you can count on independent mortgage advisors to help you find the best offset mortgage deal.
The CML did some research and found that most offset mortgages are sold through middlemen. By the end of last year, 60 percent of all offset mortgages were sold through intermediaries. In April 2005, only 45 percent of offset mortgages were sold through intermediaries.
There are several kinds of offset mortgages.
Since the first offset mortgage was introduced in the UK in 1997, the number of offset mortgage lenders has grown by a factor of five, and there are now about 250 different offset mortgage products. For instance, with a buy-to-let offset mortgage, borrowers can put their rental income into their savings or checking accounts to pay down the mortgage balance. Offset mortgages are good for people with irregular income, like those who are self-employed or get paid on commission, or for people who are buying their first home.
People who move or remortgage their homes and buy offset products tend to be a little bit older and make more money. But some younger people who are buying their first home can now use offset mortgages. One of these is the "family offset," which lets the borrower's family and/or friends use their savings to pay off their mortgage debts.
In conclusion
Offset mortgages are becoming more and more popular, and they are being called a "lifestyle tool" that can help mortgage borrowers keep their finances under control. An independent mortgage broker can help you choose the best offset mortgage deal for you by giving you good advice.
