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Based on your yearly income,
you may be able to borrow
Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.
Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.
Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.
How To Find the Lowest Fixed Rates on Offset Mortgages
Offset mortgages are an ideal borrowing product for applicants looking to take out a mortgage, and who also have savings.
This type of mortgage pitches your savings - held in an account with the same lender - and uses them to offset the amount of debt remaining to reduce the interest payable.
Contact Revolution Brokers on 0330 304 3040, or email us at [email protected], or read on to learn more.
How Do Fixed-Rate Offset Mortgages Work?
As with any other offset mortgage, a fixed-rate product links your mortgage with your current or savings account, and charges interest only on the balance owing.
Fixed-rate products mean that the interest rate is static, although the amount of interest you will pay may change each month depending on the balance.
For example, if you owe £200,000 on a mortgage but have £25,000 in a savings account, you will pay interest on the £175,000 net difference.
You still have the same access to your savings and accounts, so if you need to draw out money or pay it in, you can do - with the difference reflected in your next interest payment.
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Is a Fixed-Rate Offset Mortgage Advantageous?
It can be - but that depends on your circumstances. Offset mortgages can mean paying back your mortgage faster and paying less interest overall.
There is another benefit, in that you won't need to pay tax on interest income, since you will not earn interest on savings being used to offset your mortgage balance.
The benefit of a fixed-rate option is that you have the assurance of knowing what your payment will be each month, even if the interest element fluctuates with your savings balance.
Which Offset Mortgage is Best Suited to My Circumstances?
The best deal may be different for every applicant, and you can choose between fixed-rate or standard tracker offset mortgages.
Fixed rates usually run for at least two years and up to ten years - or might have a stable rate offered for the mortgage term's duration.
The benefit depends on your eligibility, the property, how much you need to borrow, and the value of your typical savings.
How Does a Two Year Fixed Rate Offset Mortgage Work?
Fixed rates over two years are popular since the risk to the lender is lower, and therefore the rates tend to be more competitive than for a longer-term.
However, the downside is that you will switch to the lender's standard variable rate after those two years, which is almost sure to be more expensive.
You are protected from interest rate rises for those two years, but there is a likelihood that you will lose out if you reach the end of the term and can't find a more competitive refinancing option.
Are Three-Year Fixed Rate Interest Mortgages Competitive?
They can be; a three-year fixed-rate term is becoming more common, with more protection than you get from a two-year fixed offset mortgage, but without the longer-term buy-in required for a five-year product.
In most cases, the early repayment penalty is lower, so perhaps 2% of the original mortgage balance.
How Does a Five Year Fixed Rate Option Compare?
Longer fixed-rate terms on offset mortgages can be competitive and benefit from avoiding paying higher interest for five years. However, the interest rates will be higher than you'll get on a shorter term.
You need to account for the early repayment clauses, and it's best to seek independent advice from an experienced broker before committing to a more extended fixed-term period.
How Do Ten Year Fixed Rate Offset Mortgages Work?
At the longer end of the spectrum, a ten year fixed rate offset mortgage means that you will have a decade of regular mortgage repayments.
As with a five-year term, the rates will be higher given the length of the period, and in many cases, the lender will offer up to a maximum of 75% of the property value, so you'll need a 25% deposit at least.
Ten-year terms are unusual, and we'd strongly recommend seeking expert guidance before committing to a ten-year mortgage, as comparing available rates is crucial.
Is a Fixed-Rate Flexible Mortgage a Good Borrowing Option?
A flexible mortgage means that you have greater freedoms to make additional payments, reduce your repayment value, or take a payment holiday from your mortgage.
This flexibility can be available through offset mortgages, so if you'd like to be able to fluctuate your repayment value, give us a call on 0330 304 3040.
Which is Cheaper - an Offset Mortgage or a Traditional Mortgage?
The direct cost comparison will depend very much on the rates, term, and value of borrowing. In some cases, it is cheaper to use your savings as a higher deposit, and thus take out a smaller mortgage with lower interest charges.
Give the mortgage advisors team a call for an independent evaluation of whether an offset mortgage is the cheapest option for your borrowing.
Is There a Maximum Loan Value on a Fixed Rate Offset Mortgage?
The maximum mortgage value depends on the lender's eligibility criteria, and they will base this on your deposit value and your annual income.
Typical maximums are up to four or 4.5 times your annual income, although it can be as high as five or even six times your salary if you meet all other criteria.
Should you have a savings account over a specific value, you might be able to borrow a higher mortgage amount, given that it will offset the total borrowing.
Independent UK Advice on Fixed Rate Offset Mortgages
To find the best offset mortgage deals, and compare total costs of a fixed rate option with a variable interest product, give the Revolution team a call on 0330 304 3040.
As a whole-of-market broker, we use our expertise to negotiate the most attractive rates on the market and provide direct comparisons to allow you to make an informed choice about which mortgage product is right for you.
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.