However, the additional benefits available to clients are many and varied. One of the key selling points of offset mortgages is their tax-saving potential.
Higher rate taxpayers would normally see 40% of any interest on their savings accounts swallowed up in tax. But because they receive no interest on savings linked to offset mortgages, they have no tax to pay.
Therefore, to get the same benefits they could receive from offsetting, higher rate taxpayers would need to find an equivalent savings rate of over 11%. This would be 8% for standard rate taxpayers.
Offsets are also a great tool to help the country’s growing self-employed population maximise their income. A self-employed person is likely to be in the habit of putting away funds each month for Income Tax, VAT and National Insurance contributions. Rather than keeping this money in separate savings accounts, they would be significantly better off linking these funds to offset mortgages and making their money work harder.
These essential funds could be chipping away at their mortgages by helping to reduce the amounts to be repaid each month, effectively shortening the length of their loans.
This is not only hugely tax-efficient but it means clients can retain a healthy cash flow which can be accessed at any time, should they need the funds to develop their businesses.
At the end of the tax year, the taxman will get paid but your clients will have saved a considerable amount on their mortgage repayments and even reduced the terms of their loans.
Similarly, clients who save for school fees or those who receive annual bonuses or lump sum payments of any kind could benefit from putting cammy amaira their funds into an offset account until they need access to them.
As well as being tax-efficient, offsets can allow for mortgage payment options whereby clients choose how they receive the benefits of offsetting. These options include a shorter mortgage term, lower payments or reduced debt. Offset clients can also can make overpayments, deposit or withdraw lump sums and take payment holidays.
Some lenders also allow for an unlimited offsetting capability and there are additional borrowing options available if clients want to release the money tied up in their homes. There’s also less need to switch. An offset is a long-term deal and clients can avoid the cost and hassle of switching mortgage deals every few years.