The Family Building Society’s Offset Mortgage, which was launched earlier this year, has been enhanced following feedback from customers and mortgage brokers.
Offset Mortgage borrowers can use savings to offset against their mortgage to reduce their monthly payments.
This new benefit is an alternative to the existing ability to use savings to shorten the term of the mortgage. For example, if you borrowed £200,000 and the borrower, parent or another close family member deposited £40,000 into the offset savings account, interest is charged only on £160,000.
In effect the borrower pays back more of the money borrowed each month, which can have a dramatic effect on how quickly the mortgage is paid off.
Alternatively, under the new option, borrowers may elect for lower monthly payments, keeping the term unchanged.
The Offset Mortgage also allows overpayments on a one-off or regular basis. The extra credit can be used to reduce payments at a later date.
Keith Barber, director of business development at the Family Building Society, said: “Our aim is to provide a flexible response to the needs of today’s borrower. For the self-employed, first-time buyers and other borrowers whose family members wish to help them reduce the cost of owning their home, our Offset Mortgage is compelling.
“It is ideal for the self-employed, who have to keep money for tax aside during the year and can struggle to get through purely computer-based credit assessments of some of the larger providers.
“It’s also another viable option for those who have put away money for a specific purpose, such as for a wedding or a special birthday, and who can now reduce their monthly payments or the mortgage term in the meantime.
“Our goal is to make available flexible, easy to understand ways of helping people into the homes they want and to treat every potential borrower as an individual. Our experienced underwriters use their knowledge and insight to consider each mortgage application on its own merits. It is this highly personal service that allows us to help better serve our customers’ needs”.
A minimum of £100 is needed to open the offset savings account, which is managed exclusively online. Withdrawals are allowed without penalty or having to give notice. The account does not earn interest. Borrowers can offset up to 100 per cent of the mortgage if they wish to and have sufficient funds in the linked savings accounts.
The product is available for house purchase or remortgage up to 80% loan-to-value, so you will need a 20% deposit. The initial two year discounted variable rate is currently 2.39% (which is 2.50% discount), reverting to Family Building Society variable Managed FlexiMortgage Rate, currently 4.89%. There is a £545 product fee.
