What is an offset mortgage?

An offset mortgage operates in the same way as a current account mortgage - the difference being that all accounts are held separately rather than in one place. The interest is work out by taking the state of each account separately and offsetting them against the others (either automatically or in a way of your choosing) so that you can benefit from your savings and pay less interest. A current account mortgage allows you to benefit in the same way, except it also acts a bank account so your salary goes into the same account that your mortgage is in. Not everyone likes to see a large ‘minus’ figure every time they check their bank balance!

The advantage to the offset mortgage is that the feeling of being in debt is not as all encompassing as with a current account mortgage. However an offset mortgage is more complicated and you need to make sure that your accounts are offset in the best possible way to benefit.