Shopping for Offset Mortgages

10-Aug-2007

When the offset mortgage was first introduced over nine years go, their rates were nothing to get excited about. Most often the offset mortgage rates were considerably higher then other mortgage rates that were being offered by lenders at the time. In recent years, however, the tables have turned, and now the offset mortgage sector accounts for ten percent of all of UK mortgages. The reason for this jump in popularity is because an offset mortgage allows people to pay less interest on their mortgage. This is even true if the homeowner decides to pay their mortgage off early.

It is essential to have a savings account with substantial funds in the account in order to get the best deal from offset mortgage rates. Many offset mortgage analysts recommend that a borrower should save 10 to 20 percent of the loan amount in order to achieve the best results. The home owner will not earn interest on their savings account, but instead they'll save a lot of money on their offset mortgage deal.

The Competitive Market of Offset Mortgage Rates

Even though an offset mortgage rate is still slightly higher, there has been a competitive market created between offset mortgage rates and rates of standard mortgages. There are over thirty lenders in the UK mortgage market. Many of these lenders offer a range of tracker, capped and a discount offset mortgage rate. There are numerous offset mortgage deals that offer flexibility to the borrower. The offset mortgage deals are designed to suit anyone on a variable income. This includes an individual who is self-employed, salespeople on commission and city workers on annual bonus schemes. An offset mortgage deal allows a homeowner to underpay, overpay, pay their mortgage off early and take payment holidays.

Since there is a lot of flexibility with an offset mortgage rate borrowers with a savings account can end up repaying their mortgage in a shorter period of time. In fact some borrowers have repaid their mortgage back in as little as eight years. Someone who chooses an offset mortgage also ends up paying less interest. Financial analysts predict that offset mortgages will make up 30 percent of the UK mortgage market in the near future. The offset mortgage market is expanding, growing and thriving. This means that there will be a wider range of offset mortgage rates for a borrower to choose from.

How to Choose the Best Offset Account

When choosing the best offset account it is important to remember that this is not a case of one size fits all. The best offset account for someone who is approaching retirement may not be the same as the best offset account for the first time homeowner. There are several factors to consider when shopping for the best offset mortgage.

One of the first factors that should be taken into consideration is personal spending habits. It is important to note if one is a speedy spender or a steady saver when choosing the best offset mortgage. The answer to this question can help in choosing the best offset account to suit a multitude of needs. When a first time homeowner chooses an offset account it is important to rely on the borrower?s financial habits and circumstances. For example a first time homeowner may find that the best offset mortgage account is one that offers a low introductory rate to a high loan value. This will allow the first time homeowner to know exactly what they are going to pay on their new home. Once these questions are answered one can begin looking for financial advice. 

If you're at that point, and if you'd like some advice on getting an offset mortgage, take a moment to fill out our short offset mortgage form and we will introduce you to an experienced broker from the SimplyFinance network.