Matthew has long been a supporter of offset mortgages – in fact he likes the products so much he decided to get one himself.
Matthew has offset clients who are self-employed and want to make the most of their tax savings. “These people are saving tax every month, so why not put it into their offset savings until the revenue needs it? It’s an opportunity for that money to work harder for you.
“Most people sleep better at night with money behind them, so if you have money, rather than using it to actually pay off your mortgage, you can offset it and retain access to that money.”
Matthew reckons that for the financially savvy, offsets can be a smart way of safeguarding your borrowing capability in the future. He explains: “I had one client with an offset who remortgaged to release equity to lend to his son. But he didn’t need it immediately so he put the money straight back into his offset savings account. That meant it wasn’t costing him to borrow that money but it was ready and waiting for him to give to his son when the time was right.
“I also deal with contractors who work six months on and six months off – they earn a lot for six months and put it into their offset savings account and then spend it for the following six months. But while it’s in there it’s reducing their mortgage.”
So, are there any types of borrowers that offsets really don’t suit?
“If you are borrowing to your max and know you have no ability to make overpayments, you could argue that there is no point taking a deal that might be charged at slightly higher rate of interest, if it’s of no use,” says Matthew.
He adds that they are only for financially astute people who understand the concept. “When I am explaining offsets I can tell with some clients that it just isn’t going anywhere and I often take the view not to push it. I don’t want to put that client off altogether or confuse them.”
“After completion you have a really strong reason to stay in touch with your clients to ensure they are using the offset to its full potential, so you build a long-term relationship.”
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