Flexible mortgages, often referred to as offset mortgages or current account mortgages give you some choices around your mortgage.
For example you have the ability to overpay and underpay your mortgage plus you can offset savings and, if you have a current account mortgage, you can link your current account of your mortgage. Flexible mortgages aren't suitable for everyone therefore if you are considering taking out this type of mortgage it is important to speak to a qualified mortgage adviser.
An offset mortgage is linked to one – or sometimes multiple – bank accounts. Each month, your mortgage lender calculates the interest you owe based on the total amount you have borrowed - but with an offset mortgage, this amount is reduced by the amount held in the linked accounts.
So if you have borrowed £200,000 and have savings of £20,000, you will only be paying interest on £180,000. As your savings go up or down over time, so will the amount of the mortgage on which interest is charged.
What is the difference between an offset and current account mortgage?
Where an offset mortgage is linked to a separate bank account, a current account mortgage (CAM) combines your debts and savings into a single account – where, like an offset mortgage, the savings you have reduce the interest payable on your debt. As well as your mortgage, these accounts can sometimes also include balances for loans and credit cards.
As you pay less in interest, offset mortgages can help reduce your monthly repayments, or enable you to repay your loan early.
You can offset savings and current accounts against your mortgage, and they don't always have to be held with the mortgage lender.
If you don't have much saved, you won't save much on the mortgage, and might be better choosing an alternative deal with a lower interest rate.
Offset mortgages are typically suited to people who also have large, stable amounts of savings. It's critical to remember, though, that when offset against a mortgage, these savings won't earn you interest.
For higher-rate and additional rate taxpayers, offsetting against a mortgage can prove efficient. This is because the saving you would make on your mortgage isn't tax deductible.
Offset mortgages can also be a means for family members to help reduce the mortgage burdens of relatives by storing some of their savings in an offset account. For more on this, see our guide - First time buyer help from parents.
Endsleigh's qualified and experienced mortgage advisers will recommend the most suitable flexible mortgage for your individual circumstances. We are whole of market advisers which means that we can research the whole UK mortgage market to find the best flexible mortgage deals.