If you?ve not heard of the benefits of offset or flexible mortgages then the following may help to explain how you might be able to save thousands of pounds.The two main ways lenders work offset is:-
? Have one account with an overdraft facility of the size of your mortgage, your current account, savings and mortgage are all in one account.
? Have separate accounts ? mortgage, current account and savings, the credit balances on your savings and current account are deducted from the amount owing on your mortgage, this is calculated daily.
When your salary credits your account it reduces the balance owing on your mortgage, therefore reducing the interest charged.
The best way to understand how the saving works is with an example
Property value ?420,000
Mortgage ?250,000 (25 year repayment mortgage)
Assume you have ?3,000 per month going into the current account, with an average balance of ?1,000 remaining at the end of each month and you?re saving ?100.00 per month.
If you maintained your mortgage payments this would reduce the term by 7 years 3 months, therefore saving ?138,368 on interest charged.
However despite the amazing savings that can be made, offset mortgages are not suitable in all circumstances. It really depends on the size of your mortgage and the amount you can afford to save every month. So always make sure you compare all the options and take into account the effect of taxation, mortgage and interest rates. If you would like someone to do this calculation for you please contact Sarah Gwilt (Mortgage IFA of the Year 2005) from money4dentists on 0845 345 5060.
0.44 percentage points over Bank of England Base rate (BOEBR) until 01.12.07, thereafter 1.2 percentage points over BOEBR.
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT. Written details on request from money4dentists.