Offset Mortgage - How does it work?
by admin on 22/03/09 at 6:56 am
Offset mortgages is a type of mortgaging that is common in THE UK. How an offset mortgage differs from a fixed rate mortgage and a flexible mortgage is that you pay interest on the net balance. This means if your mortgage balance is two hundred thousand pounds and you have a credit balance for twenty thousand, you will be charged interest on one hundred and eighty thousand and not on two hundred thousand. As your credit balance increases your interest rate decreases. This works for the person who has taken the mortgage as he is not paying a fixed interest rate throughout the term of the mortgage.
It also helps to induce a sense of increasing savings to reduce mortgage interests. There are advantages and disadvantages to taking an offset mortgage, as it can be confusing for people who don’t understand financial terms. You have to have your mortgage and your bank account with the same company or bank. Your mortgage interest will vary with your bank account balance and this can be disconcerting. So before taking out an offset mortgage do get the details about it and its working. Read Intelligent Finance review to get more information on mortgage types.
