Flexible mortgage

An Offset Mortgage (offset is the English word for set-off or netting, Mortgage translates as mortgage ) is a form of mortgage loan that is used in the UK for the financing of domestic properties, but also by consumer spending. In contrast to the usual forms of financing in Germany, a compulsory repayment is not provided in this form of financing.

Characteristics and Examples

The main feature of such a loan is the ability to reduce by - balances are offset against the mortgage debt, the lending rates. If the mortgage debt, for example £ 200,000 and the balance £ 50,000, interest will be charged only to the net amount of 150,000 GBP.

This is useful in several situations:

  • Liquidity requirements vary widely among the self-employed. With an offset mortgage will reduce the interest burden on home financing automatically when high liquidity is available. If the liquidity needed, only the low mortgage rates instead of paying high interest on a current account
  • People with fluctuating incomes are not obligated to make fixed repayment amounts and even have the possibility to expand the use
  • Fiscally, this form of financing in the UK is encouraged, as the capital gains tax otherwise payable attributable to the interest on credit balances.

Offset mortgage but are also used to expand the consumption possibilities similar to an overdraft or loan rates in Germany.

Lenders usually write before a credit limit at the beginning of the mortgage, and allow the borrower a loan and overdraft at this level. This limit may be adjusted periodically to the value of the property. The lender may be limitations on the border meet towards the end of the mortgage term, to ensure the repayment of capital. On the other hand, many lenders allow the full use until the end date of the mortgage if the loan must be repaid. This can lead to big problems for undisciplined borrowers and borrowers who are approaching retirement age.

Some lenders use a single account for all transactions, the so-called "current account" to German current account mortgage or "CAM ". Use another lender for this purpose multiple accounts. As a minimum, there is a mortgage account and an investment account. Often the lenders allow multiple accounts for balance and sometimes debit balances. These different accounts allow the borrowers to divide their money according to purpose during all accounts every day against the mortgage debt are netted.

Offset mortgage are equipped with a variable interest rate.

Comparable Offset Mortgage will be introduced with modifications to the British model, in the United States.

  • Real Estate Industry
  • Financing
  • Economics (United Kingdom)
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