New Way to Save on your Mortgage

by Mark Johnston

A cleaver way to save thousands on your mortgage, eliminate your borrowing and clear your debt in record time.

In February, the Yorkshire Building Society carried out some research and found that a surprisingly few number of people actually considered offset mortgages. 

Of the 2000 borrowers interviewed an overwhelming majority did not know anything about offset mortgages or how they worked.

What the research found was that 36 per cent of those asked didn’t fully understand what this mortgage was and 33 per cent didn’t know how they worked.  A staggering 30 per cent of the borrowers asked, didn’t even know that the offset mortgage existed.  There was a further shock when it was reveled that market that these mortgages are aimed at, borrowers with substantial savings, were generally not even given this option by lenders and banks.

The Yorkshire has a reputation for prudent lending and with the merger of Chelsea and Yorkshire Building Society, and the innate strength within the organisation, they have a total asset base worth £30.1 billion for 2011.  With growth averaging at about 30 per cent year on year they are definitely a company to take into consideration for the future.  The Yorkshires pre tax profits for 2010 were £115.4 million, up from their financial year in 2009 when they reported a loss of about £12.5 million.

In 2009, the Yorkshire had a gross mortgage lending book of £939 million, quite impressive but nothing compared their 2010 figures when they tripled the book to £2.9 billion.  Based on their strong management and a policy of prudent lending, the Yorkshire has been able to grow and grow responsibly. 

YBS advised that as many as 10 million homeowners may be missing out on maximizing their savings.

Offset mortgages are essentially the coming together of all your money – A combination of all your savings, your mortgage and your current account all under one roof.  So if you have a mortgage of £160,000 and savings of £60,000 then combined into one account you would only pay interest on the remaining £100,000 net figure.  Essentially, your savings would offset your borrowing and potentially save you thousands of pounds in interest and massively reducing the size of your debt and the length of the mortgage.

If you consider that debit interest rates are quite often significantly higher than saving interest rates, the opportunity to save is quite good.  What’s even better is that the interest on your borrowing or offset mortgage is calculated on a daily basis.  So any savings would immediately reduce the amount of interest you would pay.

Since all the money is in one account and there are no monthly payments, a borrower can over pay, under pay, take a payment holiday, essentially do what ever they wanted with that account since the money is all consolidated.

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