Pay off your home loan faster and get £5k boost
HOMEOWNERS can get a £ 5,000 boost from taking their cash out of a savings account and using it to pay down their mortgage.
With rates on bank deposit accounts falling so low, socalled offset mortgages are one of the few places offering decent returns.
This type of deal links your savings to your mortgage.
It saves you money on your home loan because your cash is used to reduce the amount of interest you pay on the debt.
Your bank subtracts what you have in savings from what you owe on your mortgage so you pay interest on a smaller sum. A borrower with a £100,000 mortgage and £30,000 in savings would pay interest on only £70,000.
Doing this would leave savers £4,977 better off than if they put the £30,000 in the average instant access savings account. They would also clear their debt six months earlier.
Andrew Montlake, of the mortgage broker Coreco, says: ‘Offset mortgages are one of the best-kept secrets in the financial world. Those borrowers who have taken a punt have done fantastically well.’
You can find the best rates and get free advice by visiting thisismoney.co.uk/mortgagefinder. Our sister website has an offset calculator, thisis money.co.uk/offsetcalculator.
Another option is to overpay on your standard fixed or tracker mortgage.
This means you pay more than you have to each month, which is a good plan if you don’t have a lump sum to put in an offset account.
Most lenders allow you to repay up to 10 pc of the outstanding balance each year without being hit with penalties. Some tracker mortgages have no limits on what you can repay each year. p.thomas@dailymail.co.uk