What Is an Offset Mortgage?

An offset mortgage is a mortgage with a savings/current account that’s linked to the mortgage account. Why would you want a savings account linked to your mortgage?

Because it can reduce the amount of interest you’re charged.

With an offset mortgage, the lender deducts the savings in your linked account from the outstanding mortgage balance to give a net balance. They then charge interest on this net balance, as opposed to the total outstanding mortgage balance – like they would with a normal mortgage.

You can benefit from the reduced interest charges in 2 main ways, you can either:

  • Make lower monthly payments with a payment reduction offset
  • Make the same monthly payments that you would on a normal mortgage, so that you essentially make overpayments on your mortgage and pay it off quicker, with a term reduction offset

Payment reduction offsets are available on both repayment and interest-only bases. Term reduction offsets are only available as repayment mortgages.

Would You Benefit from an Offset Mortgage?

Offset mortgages are particularly useful for people with significant amounts of savings – or those expecting to acquire some in the near future – who require a mortgage.  This could be for purchase or remortgage.

Compare Offset Mortgage Rates and Deals

You can compare offset mortgage rates currently on the market right now with our free best buy tool.

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How Can John Charcol Help You Find an Offset Mortgage?

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Process for Buying a Home

1. First Conversation with Adviser

First Conversation with Adviser

When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions then go away and find you the best offset mortgage for your circumstances and future needs. They’ll organise a follow up during which they’ll present you with what they’ve found and explain how it best suits your needs.

2. Decision in Principle

Decision in Principle

Once you’re happy with your adviser’s recommendation, they’ll go about securing your DIP (Decision in Principle) - which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property.

3. Offer on Property

Offer on Property

After you’ve secured a DIP (Decision in Principle), you’ll be in a great position to make an offer on a property. Sellers like DIPs. They show you can afford the purchase. What’s more, the fact that you’ve already started preparing for the transaction highlights to them that you’re serious in your intention to buy. 

4. Pre-Application and Submission

Pre-Application and Submission

Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.

5. Lender Underwriting and Valuation

Lender Underwriting and Valuation

The lender will underwrite your application; this basically means they’ll verify the information you’ve provided and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property you want to buy to make sure there are no significant problems with it.

6. Mortgage Offer

Mortgage Offer

If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.

7. Conveyancing

Conveyancing

After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property. You’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.

8. Exchange and Completion

Exchange and Completion

Once everything is in place, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor. It’s at this point that you put down your deposit and are legally bound to buy the property. You’ll lose your deposit if you pull out after exchange. The purchase completes when money is transferred on an agreed-upon date.

Remortgage Process

1. First Call

First Call

When you contact us, we’ll arrange an appointment between you and one of our advisers – this can be over the phone or face to face. Your adviser will ask you some questions and, once they have all the right information, they’ll go away and find you the best remortgage for your current and future needs. They’ll then organise a follow up appointment to tell you about their recommendation.

2. Decision in Principle

Decision in Principle

After your adviser has presented you with their recommendation and you’re happy to proceed, they’ll work on securing your DIP (Decision in Principle). Your DIP is a promise from the lender that they’ll loan you the money on the condition that the information you’ve provided is correct and subject to a valuation on the property.

3. Pre-Application and Submission

Pre-Application and Submission

Once the lender secures your DIP, we’ll start to prepare your mortgage application. We’ll send you a pack that explains all the different documents the lender needs. You’ll be assigned a client relationship manager who’ll go through your documents and get everything ready for submission. Your adviser will then submit your full mortgage application.

4. Lender Underwriting and Valuation

Lender Underwriting and Valuation

The lender carries out a process called “underwriting” where they check all the information and documents you’ve provided in your application. They’ll also instruct a mortgage valuation on the property to make sure there are no significant problems with it. Sometimes a lender will only instruct a desktop valuation for a remortgage – rather than a physical valuation – as your property would have likely had a valuation and internal inspection when you took out your first mortgage.

5. Mortgage Offer

Mortgage Offer

Following a successful underwriting process and valuation, the lender will accept your application and send you a mortgage offer. They’ll also send a copy to us.

6. Conveyancing

Conveyancing

After you accept the mortgage offer, you’ll go through conveyancing which is where a solicitor arranges all the legal paperwork so you can transfer from one lender to another.

7. Completion

Completion

Finally, after you’ve signed all the paperwork, your solicitor will set a date to draw down the new money to clear the outstanding balance with your current lender. Any excess funds will be returned to you. This is called completion.

Additional Services

JC Legal

There are a lot of things to organise when you buy a property, besides your mortgage. With JC Legal, we can make things easier by referring you to a solicitor from our carefully selected panel of conveyancers and solicitors.

Insurance and Protection

Whether you’re buying a new property and need insurance, or you’re remortgaging and simply want to change to a new plan, we can find you bespoke insurance and protection cover to meet your current and future needs.

Concierge Service

We don’t just find you a mortgage. We help you right up to the day you move in. With our exclusive and free Concierge Service, we can arrange removals, set up utilities, register for Council Tax and more.

Things to Consider When Taking Out an Offset Mortgage

Whilst every offset mortgage achieves the same goal in principle, there are some subtle differences between lenders.

A few of the main differences include:

  • The number of accounts that can be linked to your mortgage
  • Some lenders will accept savings from a family member to be offset against the mortgage, subject to specific requirements
  • The type and notice arrangements of these accounts
  • The access you have to your savings should you need them
  • The offset products they offer, whether it’s payment reduction, term reduction or both

Your mortgage adviser can go through the products available with you.

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