What should you do if you’re given a large bonus from work that you don’t want to spend now, but still want easy access to in the future? Stash it carefully away? Or how about use it to reduce the interest payable on your mortgage?
Although offset mortgages have been around for quite a while now, they’re still considered by many to be quite a new concept. Essentially like a flexible mortgage, you additionally have a savings account linked to your mortgage account – but instead of earning interest on your savings your money is used to “reduce” the balance of your mortgage. So if you had a £100,000 mortgage with £10,000 in the savings account, you would only accrue interest on the £90,000 portion. The smaller your debt, the more quickly you can pay it off, meaning that many people are shaving years off their mortgage term and a fortune in interest….