How to see if offsetting would work for you

If you are considering getting some sort of offset mortgage product then the chances are that you will want to find out first how much you could save.

Now largely this depends on four factors, as follows:

Firstly, it depends on how much money you have in savings

Second, it depends on the interest rate you are getting on your savings (or combined rate where appropriate)

Third, it depends on how much of your mortgage balance is outstanding - say £50,000

Fourth, it depends on the interest rate that you are currently paying your mortgage at

Now the point is that you will be getting less interest on your savings than you will be paying on your mortgage, unless something strange is going on, and this will mean that it is better for you to use the interest from your savings to pay off some of the mortgage loan then leave them sitting there separately where you will get a bit of interest on savings but in fact have a lot more interest to pay off on the mortgage part of the debt.

So, let's imagine that you have a mortgage of £50,000 as outlined above, and you have a savings balance of £20,000.

What this means is that by offsetting the one against the other you could actually take around 14 years off the average mortgage or save around £36,000! Now of course this depends on the actual rates and products offered by each bank, but it shows the principle of how offsetting works.

Most banks have tables that show what offsetting could save you so take a look at their sites and find those charts and see the eyewatering sums of money you could be saving through offsetting your savings balance against your mortgage.

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