With interest rates remaining low, is it worth looking now to make the most of your savings through offsetting against your mortgage?
If you combine your mortgage on standard variable rate with any savings you have, you can maximise the return on your savings whilst saving on the interest charged on your mortgage.
This is called offsetting.
When we discuss with clients the concept of offsetting they are often surprised to find out the range of different types of offset – from the full bank account offset to the traditional building society passbook.
There is also the choice with various mortgage lenders on how you want to benefit from the offset: whether you reduce the payment term of your mortgage, paying it off sooner, or lower the monthly repayments. Some lenders provide the facility to switch between both options.
Because of the low interest rates, many offsets are currently being offered at the same rate or only a fraction higher than the traditional mortgage. That makes now the perfect time to revisit the offset idea.
Offsetting is a creative way to increase the return on your savings. By forgoing the normal interest on his or her savings, the 40% tax payer is effectively saving even more, as with the offset there is no additional tax to be paid as the savings grow.
Find out how offsetting could make your money work harder. Come and talk to us about it at Limetree.