OffSet Mortgages

The One account was one of the first flexible offset mortgages and was introduced in 1997 as a joint venture between Virgin and The Royal Bank of Scotland.

Offset mortgages have steadily grown in popularity and now account for approximately 10% of the total mortgage market.

It is predicted that by 2009 Offset mortgages will represent 30% of all mortgage lending in the UK with around 40 providers offering variations on the offsetting theme.

How do Offset mortgages work?

Most offset mortgages link savings accounts and mortgage accounts which mean that the savings on deposit are offset against the amount owed on the mortgage. Interest is charged on the difference. For example, if you have £25,000 worth of savings in a savings account and a mortgage of £120000, you can apply for an offset mortgage and pay interest only on the difference, which is £95,000.

Offset mortgages can reduce a “normal” 25 year mortgage and cut the interest repaid by several thousand pounds. This works because borrowers are paying less interest, but continue making normal mortgage payments. The net effect is the mortgage is being overpaid which decreases the capital element of the loan faster than conventional mortgages.

Offset mortgages are flexible which allow borrowers to overpay, under pay and take payment holidays depending on their circumstances. This system works particularly well for people with variable income levels. It also allows people to plan for changes in circumstances.

Why choose an Offset mortgage?

There are a number of reasons for the appeal of offsetting:

• Generally, offset mortgages offer a competitive interest rate.

• Offset mortgages are usually flexible in terms of over or under payments.

• Offsetting the interest earned on savings against the mortgage debt will reduce the mortgage debt dramatically.

• Interest paid on savings which is offset against a mortgage debt, is tax free.

Offset mortgages vary in their flexibility and complexity so care should be taken to ensure the appropriate product is selected. Please consult our offset experts for details of how Offsetting could work for you.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

We offer all our clients a free initial consultation after which a non refundable commitment fee of £95 will be charged with a further £250 payable on completion based on individual client circumstances. We also offer a fee only option whereby we charge a 2% broker fee on the amount borrowed and any commission derived from the lender is rebated back to the client.

The overall cost for comparison is 7.9% APR

Riverside Mortgages Ltd is registered in England and Wales. Registration Number: 5978086