Know your mortgage: Offset mortgages

Originally from Australia, offset mortgages arrived here in the late 1990s with the key benefit of allowing you to offset any savings against a mortgage. Basically, instead of putting savings in a taxable savings account, this money is used instead to automatically and immediately pay down the mortgage debt. Furthermore, interest paid on savings used to offset a mortgage is tax free.

Therefore, if you have a lot of savings, or you regularly receive bonuses, offset mortgages can dramatically shorten your mortgage term.

Like flexible mortgages, you can overpay or underpay your monthly repayment, which means although you could pay off the mortgage early, you could also end up paying more in interest in the long term if you frequently underpay or if you take regular payment holidays.

Next - Part 15: Current Accounts Mortgages