Stoozing with Offset Mortgages

Offsetting

Offset mortgages allow your savings and current accounts to be used to lower the amount of interest you pay on your outstanding mortgage balance e.g. if you have a mortgage outstanding for £50,000 and a savings account containing £10,000 ; the bank will only calculate and add interest on the outstanding £40,000; effectively saving you interest by the savings amount, at the same APR as your mortgage.

This APR is often equal or greater than their typical savings account. This is similar to overpaying on your mortgage or other loans except the money is not locked in, and still accessible to remove again later.

As the money residing in your other accounts is no longer earning interest, but reducing outstanding debt, it also means the savings money is also not subject to tax unlike a normal savings account. This is an even greater benefit, if you are a higher rate taxpayer, when your savings interest is subject to the higher tax level (currently 40%).By offsetting in this way with savings, it is possible to greatly reduce the number of years that the mortgage will run for.

For example

Someone with a £100,000 mortgage and £20,000 savings, borrowing at a mortgage rate of 4.69%, would pay £41,998 interest over the course of the mortgage rather than £85,351, a saving of £43,353. And they would repay it five years and eight months early.

Linking with Stoozing

Once you have an offset mortgage, the more savings you have, the lower your mortgage interest will cost. This is where Stoozing comes in. Instead of using your own money locked away to reduce your mortgage, use the 0% balance transfers from credit cards to put money into your linked savings account using the same Stoozing methods as described in this sites stoozing guide.

It is recommended by mortgage advisors that you make the same level of payment as you did before you had any offsetting accounts. So if you are looking for a way to reduce your monthly out goings, then this is not it. It can be done this way, but you are not truly lowering your outstanding mortgage debt, just delaying it. As interest rates and future financial changes are uncertain, this is not an effective method of Stoozing.

Also ensure the Stoozing savings money is not used to overpay the mortgage. This money isn't really yours and you need to be in a position to repay the credit cards at any time.

Take a look at our stoozing offset table to find details on current good offsetting mortgage accounts

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