What is an offset mortgage?

Also known as an Australian mortgage – this is a brilliant concept. An Offset mortgage is a mortgage which is tied to a bank account and a savings account. If you have a £100,000 mortgage and £10,000 worth of savings then you only pay interest on £90,000 worth of mortgage. This is because your savings have been “Offset” against the balance of your mortgage. As interest on mortgages are mostly charged daily if you pay your salary through your linked bank account along with your savings you have one of 2 options in this instance to either 1. reduce the term of your mortgage and keep the payment the same or 2. reduce the payment and keep the term the same. Either way, depending on how much you pay through the accounts and dependent on savings, you could potentially save a great deal of money. You would not earn any interest on your savings, but you save interest on the money you owe on your mortgage.