How to pick the right offset mortgage
Mortgage providers always charge more for their offset deals than their non-offset (standard) residential mortgages. However, the mark-up between offset and standard mortgages varies from lender to lender and according to how competitive the mortgage market is. This is what you need to consider if you’re thinking about taking out an offset mortgage:
1. Some mortgage lenders charge a fixed premium for all their offset mortgages. This means that the bank or building society may charge a fixed percentage (typically between 0.1% and 0.5%) more for its offset deals than for its non-offset mortgages.
2. Some mortgage lenders charge a different mark up depending on the product. Some banks and building societies prefer to price their offset and residential mortgages individually. So, one offset deal can be 0.2% more than a comparable non-offset deal and another can be 0.5% (or more) more expensive. Some deals may even be priced identically for the offset and non-offset version.
3. You may not get so much choice with an offset mortgage. You may find that fewer lenders offer five year fixed rate offset mortgages and you may struggle to find a mortgage lender that offers a ten year fixed rate deal. However, this can change with the market so I’d check – or get a mortgage broker to do it for you.
4. You may find it harder to borrow a high loan-to-value mortgage. Some mortgage lenders don’t have offset mortgages at higher loan-to-value amounts (say 80% and above). However, a good mortgage broker should tell you which lenders are more flexible about loan limits on their offset mortgage.
5. Watch out for the fees. Most mortgage deals come with fees and charges and some of them can be quite high. Offset mortgage fees may be higher than those charged on ordinary residential mortgages. However, some lenders may not charge more – so check several lenders before you decide.
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