When exploring your options for getting a mortgage in the UK, one term that may come up especially for those with savings is an offset mortgage. But what exactly is an offset mortgage, how does it work, how do you get an offset mortgage?, and is it the right option for you? In this blog, I’ll break down everything you need to know about offset mortgages, what sets them apart from traditional home loans, and how our team of professional mortgage advisors can help you secure the most suitable offset mortgage for your circumstances.
What Is An Offset Mortgage?
An offset mortgage is a type of home loan that links your mortgage account to your savings account (and sometimes your current account) held with the same lender. Rather than earning interest on your savings, the money is used to reduce the amount of interest charged on your mortgage. Let’s say you have a £150,000 mortgage and £20,000 in savings in a linked account. With an offset mortgage, you would only pay interest on £130,000 of your mortgage balance. Your monthly repayments may stay the same, but more of your payment will go towards the capital, helping you pay off your mortgage faster.
How Is An Offset Mortgage Different From a Regular Mortgage?
A standard mortgage calculates interest based on your full loan amount. In contrast, an offset mortgage “offsets” your savings against the mortgage balance, which can lead to:
- Reduced interest payments
- Shortened mortgage term
- Greater flexibility with overpayments and savings access
Offset mortgages are particularly attractive to individuals with significant savings, self-employed professionals, or those who want the flexibility of accessing their savings without committing them to the mortgage permanently.
Who Can Get an Offset Mortgage?
While offset mortgages offer unique advantages, they’re not available to everyone. Here are some general criteria that most lenders consider:
Stable income: Lenders still require you to pass affordability assessments.
Good credit history: A solid track record of financial responsibility is essential.
Sufficient savings: You need a reasonable amount in savings to make the offset worthwhile.
Deposit: Like most mortgages, you’ll need a deposit (often 10–25% of the property’s value).
Different lenders have different rules, and not all banks and building societies offer offset mortgage products, so working with a whole-of-market broker like Oportfolio Mortgages can make all the difference.
Recent Update: Coventry Building Society Increases Mortgage Rates
If you’re considering getting an offset mortgage, it’s important to be aware of recent rate changes in the market. Coventry Building Society has recently announced that they are increasing all Offset & Offset Interest-only Fixed rates for both new borrowers and existing borrowers. This news really highlights the importance of acting quickly if you’re thinking about arranging an offset mortgage. Rates can change fast, and securing a deal now could save you thousands over the life of your mortgage.
Expert Insight from Oportfolio Mortgages
Offset mortgages can seem complex at first glance, but with the right guidance, they can be a smart financial move. Louis Mason, Marketing and Communications Director at Oportfolio Mortgages, explains:
“Offset mortgages offer a unique way for clients to make their money work harder. Especially in today’s economic climate, they provide an opportunity to reduce interest payments without giving up access to your savings. We always recommend speaking to an advisor to see how offsetting could fit into your wider financial strategy.”
Speak To A Mortgage Advisor
At Oportfolio Mortgages, we specialise in helping clients find the best mortgage solutions, including offset mortgages in the UK. Whether you’re a first-time buyer, looking to remortgage, or exploring more flexible mortgage options, we’ll help you understand if an offset mortgage is the right choice and find the best product to match your needs. Contact our friendly advisors at Oportfolio Mortgages today to book your free initial consultation. We’ll walk you through your options, assess your eligibility, and help you find the right mortgage for you.
