Filled Pocket Financial Guide

Offset mortgages have long been considered the preserve of wealthy borrowers.  Introduced into the UK in the 1990s they have often been seen as complicated products charging higher interest rates than traditional mortgages.  Consequently, they remain something of a niche product for many people.

However, there are a number of advantages to having an offset mortgage.  You don’t need to be wealthy to benefit from offset remortgage deals, and our guide outlines the top five advantages of remortgaging to an offset mortgage.

1. Reduced interest payments

An offset mortgage combines your mortgage debt with your savings balance in order to reduce the total borrowing.  For example, if you had a £150,000 mortgage and savings of £25,000, interest would be charged on the balance of £125,000, not on your total mortgage.  Whilst you may not earn any savings interest on your nest egg, you will significantly reduce the amount of mortgage interest that you pay.

2. You can make overpayments and underpayments

One of the main advantages of offset mortgages is that they can often offer more flexibility than traditional remortgage deals.  You can often make overpayments and underpayments as you wish.  For example, if you received a bonus of £5,000, you could immediately add this to your savings balance and reduce the mortgage interest that you pay.  And, you are free to withdraw that additional cash whenever you like.

In addition, many offset mortgages allow you to vary your monthly repayments.  If you have been making overpayments for a certain period, many offset deals will then allow you to make underpayments to your loan. Some offset mortgages also allow you to take a payment holiday.

3. You can shorten the term of your mortgage

If you are using savings to offset your mortgage balance, your monthly payments will be lower (as you’re paying less interest).  However, if you were to maintain your monthly repayments at the same level, you’d actually pay a little bit off the balance of your mortgage every month.

This means that simply by offsetting your savings against your mortgage and paying your standard monthly repayments, the term of your mortgage would reduce.  You’d actually pay off your mortgage quicker.

4. Make use of your savings when interest rates are low

Over the last few years interest rates in the UK have been poor, thanks to the record low Bank of England Base rate.  Trying to generate a decent return on savings has therefore been tough.  So, why not use your savings to offset your mortgage interest instead?  Rather than receiving a paltry rate of savings interest, why not save a considerable sum in mortgage interest by offsetting your savings pot?

5. Save tax

Most people pay tax on their savings interest.  If you’re a higher rate taxpayer, you’ll pay 40 per cent tax.  However, when you use your savings to offset your mortgage interest, no tax is payable.  You effectively earn a net savings rate equivalent to your current mortgage interest rate.

Offset mortgages do require some discipline and they will only really benefit you if you are proactively using the facilities that they offer.  If you have little or no savings then a traditional mortgage deal may be more suitable.  However, if you do have savings that you can use to reduce your mortgage interest, remortgaging to an offset deal could save you a considerable sum.

James McHeggins writes for http://JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.

If you are suffering from debt burden, you should try to get out of it fast. There are professional debt relief strategies with the help of which you can pay off debt in an organized way. While doing so, you may decide living more frugally so as to save additional amount with which you can get out of debt fast.

Read on to know about professional debt relief strategies and tips on how to lead a frugal life.

What is professional debt help?

You can take help of professional debt consolidation and debt settlement companies in order to get out of debt. However, you must be aware of which method to choose depending upon your debt situation. The main characteristics of both the methods are highlighted below.

Debt Consolidation:
• A negotiator from the debt consolidation company you have approached, negotiates on your behalf, with your creditors to reduce the interest rate payments on your debt
• This reduces your monthly payments hence you can pay off your debts faster
• Also all your monthly debt payments are consolidated into a single monthly payment, that you make to the debt consolidation company, which in turn distributes the money among your various creditors
• Debt consolidation affects your credit ratings positively

Debt settlement:
• A negotiator from the debt settlement company you have approached, negotiates on your behalf, with your creditors to reduce the outstanding debt payment
• The total amount of money you have to pay can be reduced from 40% to 60% depending upon your creditors. Hence you have to make a much lower payment to get out of debt
• Debt settlement may affect your credit ratings negatively

It is advisable that you choose debt consolidation as a method to get out of debt only when your debts are manageable and you can pay them back if only the amount is reduced to some extent. You should opt for debt settlement only if you are significantly behind your debt payments or can’t make them at all. In order to pay back your debt in whichever method you choose you need to start living more frugally to save money.

How can frugal living help to save money?
If you follow the given tips you will be able to save money
• Frugal living consists of shopping less whether it be for clothes, household items or groceries. You should only buy the items that are necessary and you won’t be able to do without them
• You should also avoid eating outside which will save money on food
• Try walking for short distances instead of using a public or private transport. You save money on transportation cost
Thus if you follow the above tips you will be able to save enough money to pay back your debts.

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