An offset mortgage works in a similar way to a standard mortgage, except for the inclusion of an extra feature, a savings account is attached to the mortgage arrangement. Any money placed in the savings account is automatically deducted from the amount of the mortgage on which interest is charged.
By offsetting your savings against the mortgage you will reduce the amount of interest that is charged. Other things being equal this increases your net profit from letting (the tax charged on this higher figure will be more as a result) and the offsetting increases the overall cashflow you receive from letting. This may be important if you’re relying on this as part of your retirement income, for example.
With our Buy to Let Offset Mortgage you can choose one of two options on how you benefit from the money in the offset account. Our payment reduction option is available for both capital and interest repayment mortgages and interest only mortgages. Our term reduction option is available if you select a capital and interest repayment mortgage.
Our Buy to Let Offset Mortgage is available to UK resident individuals and not corporate bodies or partnerships.
Option 1: Payment reduction
With this option, you will be using your offset savings to benefit from lower monthly mortgage payments now, but you won’t pay off your mortgage any sooner. Interest saved each month will be used to reduce the amount of your next month’s mortgage payment, so the more savings you offset, the lower your monthly payment will be.
In this example you use your savings to benefit from lower monthly payments immediately. Your mortgage balance and remaining mortgage term will not reduce any quicker than if you were on a traditional non-offset mortgage.
This option is available to both interest only mortgages and capital and interest repayment mortgages.
Option 2: Term reduction
With this option, your offset savings help you to pay your mortgage off earlier. However, offsetting won’t have an impact on your monthly mortgage payments. Instead, the interest you save by offsetting your savings means you pay more of the mortgage back each month. Your mortgage balance should reduce faster, and you may be able to pay your mortgage off early.
This option is not available if you select an interest only mortgage.
To find out more about the benefits of our Buy to Let Offset Mortgage and for more information, download our Buy to Let Offset Mortgage leaflet.
To view the mortgage rates of our Buy to Let Offset Mortgage and other important information, download our product summary for purchase or remortgage. The Buy to Let Offset Mortgage is listed on the second page.
Alternatively, you may want to check our Buy to Let lending criteria or find out more about our other Buy to Let mortgages available.
If you'd like to speak with our New Business Team to find out more and how to apply for our Buy to Let Offset Mortgage you can call us on 03330 140140.
THE MORTGAGE WILL BE SECURED ON YOUR PROPERTY
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE