It is popular these days to have an offset mortgage. These mortgages have an associated bank account or savings account or both. Then any money that is in these accounts will be taken away from the mortgage balance when the interest is calculated. Interest may be calculated daily or monthly, depending on the terms of the specific mortgage.
Value for Money
These mortgages can offer good value for money, particularly if you have a lot of savings, or thing you will build up a lot of savings to offset. This is because mortgage interest is usually much higher than any interest you can get on current accounts or savings accounts. This means that you will benefit financially compared to having the same mortgage and the other money held in current or savings accounts. However, an offset mortgage can be more expensive than other types of mortgage so even with the money offsetting and reducing the interest paid it may still be more expensive than other types of mortgage. You may also get better interest on your savings if you invest then for five or ten years. This may be more risky but you could end up a lot better off doing this and then paying that lump sum of the mortgage if you can. It is therefore worth doing some calculation before you commit to this type of mortgage.
Many offset mortgages can be more flexible than other types. You can pay money into the savings account to offset the interest and pay less, but you may also be able to draw that money back out as well. This will depend on the terms of your specific mortgage so if you want this option then you need to make sure that it is included. You may also find that you will be able to take a payment holiday if you have paid some extra money in. This will have to be negotiated with your provider though and it will almost certainly lead to you being charged more for the loan in the long run. You can also overpay more when you have the money but only pay the minimum when you do not which can be really useful.
Being able to repay your mortgage early can be really useful. Not only can it be much cheaper but it can also help you in other ways. If you worry about the burden of being in debt then paying the mortgage off early can help you to feel a lot better. Even before it Is fully paid off, it can make you feel a lot better knowing that you are slowly reducing the debt. If you want to borrow more money, perhaps for home improvements, car purchase, buy-to-let property or something like that, then not having so much of a mortgage debt can be a big help in being able to secure this other debt. Banks will see that you have paid a lot back and it will work in your favour.