Could your savings help pay off your mortgage?

Chris Thomas — Mon, 28 Apr 2008 14:40:07 +0100

Conventional wisdom says that you should put any spare money into a savings account. Yet if you’ve already set aside a chunk of cash for a rainy day and you have a mortgage, it may be time to consider an offsetting arrangement to make your savings work harder for you.

Offsetting works by combining your savings account, and depending on the product, perhaps also your current account or individual savings accounts with your mortgage.

It works like this: any savings that you have are deducted from the amount you owe on your home loan and interest is charged only on the difference. This means if you have a mortgage of £200,000 and £15,000 in a linked savings account, you would only pay interest on the net balance of £185,000.