Offset mortgages- Are they a good thing during troubled times?

The idea behind offset mortgages have been around for a long time and, at least on paper, provides some positive options for home owners, who can manage to save as well as keep up to date with their mortgage. Nowadays, no one needs to be told that things are different, meaning for most families, considerably tougher.

So for those people who have succeeded in accumulating some savings, which is currently earning them almost negative interest, the option of switching to an offset mortgage, and drawing on their funds held on deposit to pay part if not all their mortgage must hold a certain appeal. Especially if they are unemployed, or generally struggling to make ends meet

At one time, savers who held an offset mortgage could avoid paying tax on interest that their deposits earned. This is no longer an issue, and even if interest rates were to rise, it would be by little and certainly not for the foreseeable future. And with mortgage rates being low at the moment, what can be gained financially is minimal. Basically the attraction for home owners, who have money on deposit, is to release the stress factor in having to meet mortgage payments. And if the possibility of repossession exists, it is an option that shouldn’t be ignored.

However the danger lies in the possibility of panicking, and paying off a mortgage before time, leaving the family without access to cash reserves but with a property that may be difficult to retain or maintain in the future.

So anyone considering an offset mortgage should consider their options very carefully. To partially pay a mortgage every month for a pre-determined period may be the best alternative, and should be fine tuned so that savings are not allowed to deplete to too low a level.

Recent research has shown that offset mortgage lending is gaining popularity, and currently accounts for 10% of all sums lent to UK mortgage holders.

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Tags: Financial News, Money Management, Money Markets, Mortgage, Mortgages, negative equity, Offset mortgages