What is an offset mortgage?
 
With this mortgage, your savings are offset against your mortgage loan, which means that instead of earning savings interest, you are charged less interest on your mortgage.  Your monthly mortgage payments are calculated on the full balance of the mortgage loan regardless of the amount of your offset savings. This results in overpayments being made each month equivalent to the amount of the offset interest.  
 
When a mortgage payment recalculation event* takes place, the new payment is calculated on the reduced mortgage balance.
 
*Recalculation events include interest rate changes, a mortgage capital repayment, product switches, change of repayment method and change of mortgage term.
 
Why might an offset mortgage be useful for me?
 
An offset may be useful if you do not plan to immediately use all the funds that you release from your property. For example you may plan to do some home improvements in one year’s time. With an offset mortgage you can borrow the money now but not pay interest on it until you need it, simply by leaving the funds in the offset savings account until that time. It’s also useful if you have surplus savings as you can keep these in the offset savings account and reduce the interest charged on your mortgage. 
 
How does an offset mortgage work?  
 
Let’s say you had a mortgage of £200,000 and a total balance of £50,000 in an offset savings account linked to your mortgage. We’ll calculate your mortgage interest on the remaining balance of £150,000 only – potentially saving you thousands of pounds in interest payments over the term of your mortgage.
 
 
Operating your savings account

You will be provided with a passbook for your offset savings account. You can add or withdraw your savings whenever you want without penalty, either by cheque, Faster Payment or cash (within operating limits). You can open your account with a nominal balance, but the more you pay in, the less interest you will be charged on your offset mortgage.

 

Vernon Building Society
19 St Petersgate
Stockport
SK1 1HF

Tel: 0161 429 6262
Email: info@thevernon.co.uk

Telephone calls are recorded and may be monitored for regulatory and training purposes to help maintain service quality.

*The 'AER' stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Vernon Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority (registration number 195475).  You can check this on the Financial Services Register. We are also a participant of the Financial Services Compensation Scheme (FSCS). Details of the scheme can be obtained from www.fscs.org.uk

Telephone calls are recorded and may be monitored for regulatory and training purposes to help maintain service quality.

For independent information about financial products and services visit  www.moneyadviceservice.org.uk

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